Have equity in your home? Want a lower payment? An appraisal from Harper & Strickland, Inc. can help you get rid of your PMI.
It's typically known that a 20% down payment is accepted when buying a house. Since the liability for the lender is often only the remainder between the home value and the sum remaining on the loan, the 20% adds a nice buffer against the charges of foreclosure, selling the home again, and natural value changesin the event a purchaser is unable to pay.
Banks were working with down payments down to 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender endure the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI protects the lender in the event a borrower doesn't pay on the loan and the market price of the house is lower than the loan balance.
PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and many times isn't even tax deductible. Contradictory to a piggyback loan where the lender absorbs all the damages, PMI is profitable for the lender because they secure the money, and they get the money 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 buyers can keep from bearing the expense of PMI
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Wise home owners can get off the hook beforehand. The law stipulates that, upon request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent.
Because it can take many years to get to the point where the principal is just 20% of the initial amount of the loan, it's necessary to know how your home has increased in value. After all, all of the 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? Despite the fact that nationwide trends predict plummeting home values, understand that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home may have gained equity before things calmed down.
The hardest thing for many home owners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can surely help. It's an appraiser's job to know the market dynamics of their area. At Harper & Strickland, Inc., we're masters at pinpointing value trends in Fairview, Collin 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 often cancel the PMI with little anxiety. At which time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: