Let Larkins Appraisal Services help you determine if you can eliminate your PMI
A 20% down payment is usually accepted when buying a house. The lender's risk is usually only the difference 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 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 manage the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower doesn't pay on the loan and the market price of the home is less than what is owed on the loan.
PMI can be pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and many times isn't even tax deductible. It's money-making for the lender because they obtain the money, and they receive payment if the borrower defaults, unlike a piggyback loan where the lender takes in all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home owners can refrain from bearing the cost of PMI
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law pledges that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent. So, savvy homeowners can get off the hook ahead of time.
It can take countless years to reach the point where the principal is just 20% of the original loan amount, so it's crucial to know how your home has grown in value. After all, every bit of appreciation you've achieved over time counts towards abolishing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood might not be heeding the national trends and/or your home might have acquired equity before things calmed down, so even when nationwide trends forecast plummeting home values, you should understand that real estate is local.
The difficult thing for most home owners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. As appraisers, it's our job to know the market dynamics of our area. At Larkins Appraisal Services, we know when property values have risen or declined. We're masters at analyzing value trends in Kingsport, Sullivan County and surrounding areas. Faced with data from an appraiser, the mortgage company will often do away with the PMI with little trouble. At that 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: