Have equity in your home? Want a lower payment? An appraisal from Catawba Valley Appraisal can help you get rid of your PMI.
When getting a mortgage, a 20% down payment is typically the standard. The lender's risk is usually only the difference between the home value and the amount outstanding on the loan, so the 20% provides a nice cushion against the costs of foreclosure, reselling the home, and typical value changes in the event a borrower defaults.
The market was taking down payments down to 10, 5 and even 0 percent during the mortgage boom of the last decade. A lender is able to handle the added risk of the minimal down payment with Private Mortgage Insurance or PMI. This supplemental plan guards the lender if a borrower doesn't pay on the loan and the value of the property is less than what is owed on the loan.
PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and generally isn't even tax deductible. Unlike a piggyback loan where the lender absorbs all the losses, PMI is money-making for the lender because they collect the money, and they get paid if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home owners refrain from bearing the cost of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on most loans 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 ahead of time. The law promises that, at the request of the homeowner, the PMI must be released when the principal amount equals just 80 percent.
Since it can take countless years to arrive at the point where the principal is only 20% of the initial amount borrowed, it's important to know how your home has increased in value. After all, any appreciation you've acquired over the years counts towards removing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Your neighborhood might not be adopting the national trends and/or your home could have secured equity before things settled down, so even when nationwide trends indicate declining home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a tough thing to know. It is an appraiser's job to keep up with the market dynamics of their area. At Catawba Valley Appraisal, we know when property values have risen or declined. We're masters at identifying value trends in Granite Falls, Caldwell County and surrounding areas. Faced with figures from an appraiser, the mortgage company will often eliminate 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: