Let Anderson Appraisal, LLC help you figure out if you can get rid of your PMI
When getting a mortgage, a 20% down payment is typically the standard. Considering the risk for the lender is often only the difference between the home value and the amount remaining on the loan, the 20% supplies a nice buffer against the charges of foreclosure, selling the home again, and regular value fluctuationson the chance that a borrower defaults.
The market was working with down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the added risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower doesn't pay on the loan and the market price of the home is lower than what is owed on the loan.
PMI can be expensive to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and oftentimes isn't even tax deductible. 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 get paid if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home owners can prevent paying PMI
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Keen home owners can get off the hook a little early. The law designates that, upon request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent.
It can take many years to arrive at the point where the principal is only 20% of the initial loan amount, so it's crucial to know how your home has increased in value. After all, any appreciation you've achieved over time counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Your neighborhood might not be adopting the national trends and/or your home could have gained equity before things settled down, so even when nationwide trends signify falling home values, you should understand that real estate is local.
The difficult thing for many home owners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can surely help. It's an appraiser's job to know the market dynamics of their area. At Anderson Appraisal, LLC, we're experts at analyzing value trends in Amarillo, Randall County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will generally do away with the PMI with little trouble. 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: