Have equity in your home? Want a lower payment? An appraisal from Milwaukee Appraisal Co./Stowe Appraisals can help you get rid of your PMI.
When purchasing a home, a 20% down payment is typically the standard. Since the risk for the lender is generally only the difference between the home value and the amount due on the loan, the 20% supplies a nice cushion against the expenses of foreclosure, reselling the home, and typical value changesin the event a borrower defaults.
During the recent mortgage boom of the last decade, it was customary 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. This additional plan takes care of the lender if a borrower doesn't pay on the loan and the worth of the property is less than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and generally isn't even tax deductible, PMI can be costly to a borrower. Different from a piggyback loan where the lender absorbs all the costs, PMI is money-making for the lender because they obtain the money, and they receive payment 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 home owners can keep from bearing the cost of PMI
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law guarantees that, upon request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent. So, acute home owners can get off the hook sooner than expected.
It can take countless years to get to the point where the principal is only 20% of the initial amount of the loan, so it's important to know how your home has grown in value. After all, all of the appreciation you've gained over time counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Despite the fact that nationwide trends indicate plummeting home values, be aware that real estate is local. Your neighborhood might not be minding the national trends and/or your home could have acquired equity before things simmered down.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. As appraisers, it's our job to know the market dynamics of our area. At Milwaukee Appraisal Co./Stowe Appraisals, we know when property values have risen or declined. We're experts at identifying value trends in Franklin, Milwaukee County and surrounding areas. When faced with figures from an appraiser, the mortgage company will usually eliminate the PMI with little trouble. At which time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: