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 getting a mortgage. The lender's liability is oftentimes only the remainder between the home value and the sum outstanding on the loan, so the 20% adds a nice buffer against the charges of foreclosure, reselling the home, and typical value variations on the chance that a borrower defaults.
During the recent mortgage boom of the mid 2000s, it became widespread to see lenders commanding down payments of 10, 5 or even 0 percent. A lender is able to handle the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower defaults on the loan and the market price of the property is less than what the borrower still owes on the loan.
PMI can be costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and many times isn't even tax deductible. It's advantageous for the lender because they collect the money, and they get paid if the borrower doesn't pay, contradictory to a piggyback loan where the lender takes in all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home buyers keep from bearing the expense of PMI?
With the implementation 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 initial loan amount. Savvy home owners can get off the hook sooner than expected. The law states that, at the request of the home owner, the PMI must be released when the principal amount equals just 80 percent.
Considering it can take countless years to get to the point where the principal is only 20% of the initial amount borrowed, it's necessary to know how your home has grown in value. After all, every bit of appreciation you've gained over time counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% mark? Your neighborhood may not be adhering to the national trends and/or your home may have acquired equity before things simmered down, so even when nationwide trends forecast plummeting home values, you should realize that real estate is local.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At A & B Tax Service, we know when property values have risen or declined. We're masters at identifying value trends in Sturtevant, Racine County and surrounding areas. When faced with information from an appraiser, the mortgage company will usually remove 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: