Have equity in your home? Want a lower payment? An appraisal from AdvantEdge Valuation Services, LLC can help you get rid of your PMI.
A 20% down payment is usually accepted when purchasing a home. The lender's liability is usually only the remainder between the home value and the amount remaining on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and natural value variations in the event a purchaser is unable to pay.
The market was accepting down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender endure the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This additional plan covers the lender if a borrower doesn't pay on the loan and the market price of the home is lower than what the borrower still owes on the loan.
PMI can be costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and oftentimes isn't even tax deductible. It's lucrative for the lender because they obtain the money, and they get the money if the borrower defaults, opposite from a piggyback loan where the lender absorbs all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home buyers can refrain from bearing the expense of PMI
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Smart home owners can get off the hook a little early. The law stipulates that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent.
It can take many years to reach the point where the principal is only 20% of the original amount of the loan, so it's crucial to know how your home has grown in value. After all, any appreciation you've acquired over time counts towards abolishing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Your neighborhood may not be reflecting the national trends and/or your home might have secured equity before things simmered down, so even when nationwide trends forecast declining home values, you should understand that real estate is local.
The toughest thing for most home owners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can certainly help. As appraisers, it's our job to keep up with the market dynamics of our area. At AdvantEdge Valuation Services, LLC, we know when property values have risen or declined. We're experts at identifying value trends in Noblesville, Hamilton County and surrounding areas. When faced with information from an appraiser, the mortgage company will often cancel the PMI with little anxiety. At which time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: