Have equity in your home? Want a lower payment? An appraisal from Crescent Appraisal Group, Inc. can help you get rid of your PMI.
A 20% down payment is typically accepted when getting a mortgage. Since the liability for the lender is usually only the difference between the home value and the sum outstanding on the loan, the 20% supplies a nice buffer against the expenses of foreclosure, selling the home again, and regular value changesin the event a borrower is unable to pay.
The market was taking down payments down to 10, 5 and even 0 percent during the mortgage boom of the last decade. A lender is able to endure the added risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI protects the lender if a borrower is unable to pay on the loan and the value of the house is less than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and generally isn't even tax deductible, PMI is pricey to a borrower. It's money-making for the lender because they obtain the money, and they get the money if the borrower doesn't pay, different 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 can home owners prevent paying PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law promises that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, savvy home owners can get off the hook a little earlier.
It can take many years to arrive at the point where the principal is only 20% of the original loan amount, so it's important to know how your home has grown in value. After all, any appreciation you've gained over the years counts towards removing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% threshold? Your neighborhood might not be adopting the national trends and/or your home could have gained equity before things simmered down, so even when nationwide trends forecast plunging home values, you should realize that real estate is local.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. As appraisers, it's our job to know the market dynamics of our area. At Crescent Appraisal Group, Inc., we're masters at identifying value trends in Metairie, Jefferson County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will generally remove the PMI with little anxiety. At that time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: