Have equity in your home? Want a lower payment? An appraisal from TK Valuations, Inc. can help you get rid of your PMI.
A 20% down payment is usually the standard when buying a house. Since the liability for the lender is often only the difference between the home value and the sum outstanding on the loan, the 20% adds a nice cushion against the costs of foreclosure, reselling the home, and typical value fluctuationson the chance that a borrower is unable to pay.
Lenders were working with down payments as low as 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. A lender is able to handle the increased risk of the low down payment with Private Mortgage Insurance or PMI. This added plan covers the lender in case a borrower doesn't pay on the loan and the worth of the home is lower than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and frequently isn't even tax deductible, PMI can be expensive to a borrower. It's lucrative for the lender because they secure the money, and they receive payment if the borrower is unable to pay, 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 can a home buyer refrain from bearing the cost of PMI?
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Smart homeowners can get off the hook beforehand. The law guarantees that, upon request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent.
Considering it can take countless years to get to the point where the principal is just 20% of the initial amount of the loan, 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 dismissing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Despite the fact that nationwide trends indicate declining home values, realize that real estate is local. Your neighborhood might not be adopting the national trends and/or your home could have secured equity before things settled down.
The difficult thing for almost all 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 recognize the market dynamics of our area. At TK Valuations, Inc., we're experts at recognizing value trends in Williamsville, Erie County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will most often eliminate the PMI with little trouble. At which time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: