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 usually the standard when buying a house. The lender's liability is often only the difference between the home value and the amount due on the loan, so the 20% supplies a nice cushion against the costs of foreclosure, selling the home again, and typical value fluctuations on the chance that a purchaser doesn't pay.
Banks were working with down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender endure the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This added plan takes care of the lender in case a borrower defaults on the loan and the value of the property is lower than the balance of 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 monthly payment and generally isn't even tax deductible. Different from a piggyback loan where the lender takes in all the losses, PMI is profitable for the lender because they obtain the money, and they get the money if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home owner keep from paying PMI?
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Wise homeowners can get off the hook sooner than expected. The law stipulates that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent.
It can take countless years to reach the point where the principal is just 20% of the original amount of the loan, so it's important to know how your home has increased in value. After all, any appreciation you've achieved over time counts towards abolishing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood might not be reflecting the national trends and/or your home could have gained equity before things settled down, so even when nationwide trends predict decreasing home values, you should understand that real estate is local.
The toughest thing for many homeowners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can definitely help. It is an appraiser's job to know the market dynamics of their area. At A & B Tax Service, we know when property values have risen or declined. We're masters at pinpointing value trends in Sturtevant, Racine County and surrounding areas. When faced with information from an appraiser, the mortgage company will generally remove the PMI with little effort. 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: