Let Anderson Appraisal, LLC help you figure out if you can eliminate your PMI
It's generally understood that a 20% down payment is accepted when buying a house. The lender's risk is oftentimes only the difference between the home value and the sum outstanding on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and typical value changes in the event a purchaser doesn't pay.
During the recent mortgage boom of the mid 2000s, it was customary to see lenders taking down payments of 10, 5 or often 0 percent. A lender is able to endure the added risk of the reduced down payment with Private Mortgage Insurance or PMI. This additional plan protects the lender in the event a borrower doesn't pay on the loan and the value of the home is lower than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and oftentimes isn't even tax deductible, PMI can be pricey to a borrower. Separate from a piggyback loan where the lender absorbs all the deficits, PMI is favorable for the lender because they collect the money, and they get paid 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 home buyers can refrain from bearing the expense of PMI
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law designates that, upon request of the home owner, the PMI must be released when the principal amount reaches only 80 percent. So, keen home owners can get off the hook sooner than expected.
It can take many years to arrive at the point where the principal is only 20% of the initial amount borrowed, so it's important to know how your home has appreciated in value. After all, every bit of appreciation you've obtained over time counts towards dismissing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Your neighborhood might not be reflecting the national trends and/or your home may have secured equity before things settled down, so even when nationwide trends hint at plummeting home values, you should realize that real estate is local.
The hardest thing for most homeowners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can definitely help. It's an appraiser's job to know the market dynamics of their area. At Anderson Appraisal, LLC, we know when property values have risen or declined. We're masters at analyzing value trends in Amarillo, Potter County and surrounding areas. When faced with figures from an appraiser, the mortgage company will generally remove the PMI with little effort. At which 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: