Let Crescent Appraisal Group, Inc. help you determine if you can get rid of your PMI
A 20% down payment is typically accepted when buying a house. Considering the liability for the lender is generally only the difference between the home value and the amount outstanding on the loan, the 20% adds a nice buffer against the costs of foreclosure, selling the home again, and natural value variationson the chance that a purchaser doesn't pay.
The market was taking down payments as low as 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 low down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower defaults on the loan and the market price of the house is lower than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and many times isn't even tax deductible, PMI can be costly to a borrower. Different from a piggyback loan where the lender absorbs all the costs, PMI is advantageous for the lender because they acquire the money, and they receive payment if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homeowners can refrain from paying PMI
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law stipulates that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, smart homeowners can get off the hook a little early.
Because it can take many years to reach the point where the principal is only 20% of the initial amount borrowed, it's crucial to know how your home has grown in value. After all, all of the appreciation you've obtained over time counts towards abolishing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not be adopting the national trends and/or your home might have acquired equity before things cooled off, so even when nationwide trends hint at falling home values, you should understand that real estate is local.
The difficult thing for most home owners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can certainly help. As appraisers, it's our job to understand the market dynamics of our area. At Crescent Appraisal Group, Inc., we know when property values have risen or declined. We're masters at analyzing value trends in Metairie, Jefferson County and surrounding areas. Faced with data from an appraiser, the mortgage company will most often eliminate the PMI with little effort. At which time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: