Have equity in your home? Want a lower payment? An appraisal from Crescent Appraisal Group, Inc. can help you get rid of your PMI.
It's generally known that a 20% down payment is common when purchasing a home. The lender's liability is generally only the remainder between the home value and the amount remaining on the loan, so the 20% supplies a nice cushion against the costs of foreclosure, selling the home again, and typical value changes on the chance that a borrower doesn't pay.
During the recent mortgage boom of the mid 2000s, it was widespread to see lenders commanding down payments of 10, 5 or sometimes 0 percent. A lender is able to handle the added risk of the low down payment with Private Mortgage Insurance or PMI. This additional policy protects the lender in the event a borrower defaults on the loan and the value of the house is lower than what is owed on the loan.
PMI is pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and generally isn't even tax deductible. It's profitable for the lender because they acquire the money, and they receive payment if the borrower defaults, unlike a piggyback loan where the lender takes in all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home owners can avoid paying PMI
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically stop the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Savvy homeowners can get off the hook beforehand. The law pledges that, at the request of the home owner, the PMI must be released when the principal amount equals just 80 percent.
Since it can take countless years to reach the point where the principal is just 20% of the initial amount of the loan, it's important to know how your home has appreciated in value. After all, all of the appreciation you've acquired over the years counts towards removing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Your neighborhood may not be adopting the national trends and/or your home might have secured equity before things simmered down, so even when nationwide trends signify falling home values, you should understand that real estate is local.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. It's an appraiser's job to recognize the market dynamics of their area. At Crescent Appraisal Group, Inc., we know when property values have risen or declined. We're masters at determining value trends in Metairie, Jefferson County and surrounding areas. Faced with information from an appraiser, the mortgage company will usually remove the PMI with little effort. At which time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: