Let Crescent Appraisal Group, Inc. help you discover if you can get rid of your PMI
When getting a mortgage, a 20% down payment is usually the standard. The lender's liability is often only the remainder between the home value and the sum outstanding on the loan, so the 20% adds a nice cushion against the expenses of foreclosure, reselling the home, and typical value variations in the event 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. A lender is able to endure the increased risk of the small down payment with Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower defaults on the loan and the value of the home is lower than what is owed on the loan.
PMI is costly to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and often isn't even tax deductible. It's lucrative for the lender because they acquire the money, and they receive payment if the borrower defaults, opposite from a piggyback loan where the lender absorbs all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homebuyers can keep from 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 beginning loan amount. Keen home owners can get off the hook a little early. The law states that, at the request of the homeowner, the PMI must be released when the principal amount equals just 80 percent.
Since it can take countless years to arrive at the point where the principal is just 20% of the initial loan amount, it's necessary to know how your home has appreciated in value. After all, all of the appreciation you've achieved 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% mark? Even when nationwide trends predict falling home values, realize that real estate is local. Your neighborhood might not be following the national trends and/or your home might have secured equity before things simmered down.
The toughest thing for many homeowners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can surely help. As appraisers, it's our job to keep up with the market dynamics of our area. At Crescent Appraisal Group, Inc., we know when property values have risen or declined. We're masters at pinpointing value trends in Metairie, Jefferson County and surrounding areas. When faced with information from an appraiser, the mortgage company will often eliminate the PMI with little effort. At that 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: