Let Double J Appraisals, LLC. help you decide if you can get rid of your PMI
It's generally known that a 20% down payment is the standard when getting a mortgage. Considering the liability for the lender is generally only the remainder between the home value and the amount due on the loan, the 20% adds a nice cushion against the charges of foreclosure, reselling the home, and natural value fluctuationson the chance that a borrower defaults.
During the recent mortgage upturn of the last decade, it became widespread to see lenders taking down payments of 10, 5 or sometimes 0 percent. How does a lender manage the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender if a borrower doesn't pay on the loan and the value of the home is less than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and generally isn't even tax deductible, PMI is pricey to a borrower. It's favorable for the lender because they acquire the money, and they get paid if the borrower doesn't pay, contradictory to a piggyback loan where the lender takes in all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homebuyer avoid bearing the cost of PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Wise home owners can get off the hook ahead of time. The law guarantees that, upon request of the home owner, the PMI must be released when the principal amount reaches just 80 percent.
It can take countless years to reach the point where the principal is just 20% of the original loan amount, so it's essential to know how your home has grown in value. After all, all of the appreciation you've achieved over time counts towards dismissing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Despite the fact that nationwide trends predict plunging home values, be aware that real estate is local. Your neighborhood may not be minding the national trends and/or your home may have acquired equity before things calmed down.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. It's an appraiser's job to understand the market dynamics of their area. At Double J Appraisals, LLC., we know when property values have risen or declined. We're masters at determining value trends in Davison, Genesee County and surrounding areas. When faced with figures from an appraiser, the mortgage company will most often do away with the PMI with little anxiety. At that time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: