Have equity in your home? Want a lower payment? An appraisal from A & B Tax Service can help you get rid of your PMI.
A 20% down payment is typically accepted when buying a house. Because the risk for the lender is often only the difference between the home value and the sum due on the loan, the 20% provides a nice buffer against the charges of foreclosure, selling the home again, and typical value changesin the event a borrower is unable to pay.
During the recent mortgage upturn of the last decade, it was common to see lenders requiring down payments of 10, 5 or sometimes 0 percent. How does a lender endure the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This additional policy protects the lender in the event a borrower defaults on the loan and the value of the property is less than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and frequently isn't even tax deductible, PMI is pricey to a borrower. It's lucrative for the lender because they acquire the money, and they get paid if the borrower defaults, 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 home owners can avoid bearing the expense of PMI
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically cease the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Wise homeowners can get off the hook a little earlier. The law guarantees that, upon request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent.
It can take many years to arrive at the point where the principal is only 20% of the initial amount of the loan, so it's crucial to know how your home has increased in value. After all, any appreciation you've accomplished over time counts towards dismissing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Your neighborhood may not be adhering to the national trends and/or your home may have secured equity before things calmed down, so even when nationwide trends forecast decreasing home values, you should understand that real estate is local.
The difficult thing for most homeowners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can certainly help. It is an appraiser's job to keep up with the market dynamics of their area. At A & B Tax Service, we're experts at determining value trends in Sturtevant, Racine County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will generally drop the PMI with little effort. At which 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: