Have equity in your home? Want a lower payment? An appraisal from A & B Tax Service can help you get rid of your PMI.
When purchasing a home, a 20% down payment is usually the standard. Since the risk for the lender is oftentimes only the difference between the home value and the amount outstanding on the loan, the 20% supplies a nice cushion against the costs of foreclosure, reselling the home, and natural value fluctuationson the chance that a purchaser is unable to pay.
During the recent mortgage boom of the mid 2000s, it became widespread to see lenders taking down payments of 10, 5 or sometimes 0 percent. How does a lender manage the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This additional policy takes care of the lender if a borrower doesn't pay on the loan and the value of the home is lower than what is owed on the loan.
PMI is pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and many times isn't even tax deductible. It's lucrative for the lender because they secure the money, and they receive payment if the borrower defaults, contradictory to a piggyback loan where the lender absorbs all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homeowners can refrain from paying PMI
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Savvy homeowners can get off the hook a little earlier. The law states that, upon request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent.
Considering it can take many years to reach the point where the principal is just 20% of the original amount of the loan, it's essential to know how your home has appreciated in value. After all, every bit of appreciation you've gained over time counts towards abolishing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Even when nationwide trends signify decreasing home values, understand that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home might have gained equity before things calmed down.
The difficult thing for almost all homeowners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can certainly help. It's an appraiser's job to recognize the market dynamics of their area. At A & B Tax Service, we're experts at pinpointing value trends in Sturtevant, Racine County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will usually eliminate the PMI with little anxiety. 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: