Let Biggs Appraisal Services help you determine if you can get rid of your PMI
A 20% down payment is usually accepted when purchasing a home. Because the risk for the lender is generally only the difference between the home value and the sum remaining on the loan, the 20% adds a nice buffer against the charges of foreclosure, reselling the home, and natural value fluctuationson the chance that a purchaser doesn't pay.
Banks were working with down payments as low as 10, 5 and often 0 percent during the mortgage boom of the last decade. A lender is able to manage the added risk of the small down payment with Private Mortgage Insurance or PMI. This supplementary policy guards the lender in case a borrower is unable to pay on the loan and the market price of the house is less than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and generally isn't even tax deductible, PMI can be expensive to a borrower. Unlike a piggyback loan where the lender absorbs all the losses, PMI is favorable for the lender because they secure the money, and they get paid 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 home buyers avoid bearing the cost of PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Acute homeowners can get off the hook ahead of time. The law promises that, at the request of the home owner, the PMI must be released when the principal amount equals just 80 percent.
It can take countless years to reach the point where the principal is only 20% of the original amount borrowed, so it's essential to know how your home has grown in value. After all, every bit of appreciation you've achieved over time counts towards abolishing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood might not be heeding the national trends and/or your home could have gained equity before things cooled off, so even when nationwide trends hint at plummeting home values, you should realize that real estate is local.
The difficult thing for almost all homeowners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can surely help. As appraisers, it's our job to understand the market dynamics of our area. At Biggs Appraisal Services, we know when property values have risen or declined. We're experts at identifying value trends in Raymore, Cass County and surrounding areas. When faced with figures from an appraiser, the mortgage company will often eliminate the PMI with little anxiety. At that 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: