Have equity in your home? Want a lower payment? An appraisal from Higdon & Associates can help you get rid of your PMI.
A 20% down payment is typically accepted when buying a house. The lender's risk is often only the remainder between the home value and the sum outstanding on the loan, so the 20% adds a nice buffer against the charges of foreclosure, selling the home again, and regular value changes on the chance that a purchaser defaults.
During the recent mortgage boom of the last decade, it became widespread to see lenders requiring down payments of 10, 5 or often 0 percent. A lender is able to handle the added risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower doesn't pay on the loan and the worth of the property is lower than the loan balance.
PMI is pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible. Contradictory to a piggyback loan where the lender takes in all the deficits, PMI is profitable for the lender because they obtain 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 homebuyers can keep from bearing the cost of PMI
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically cease the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Keen homeowners can get off the hook ahead of time. The law states that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent.
It can take countless years to reach the point where the principal is just 20% of the original amount borrowed, so it's crucial to know how your home has grown in value. After all, any appreciation you've gained over the years counts towards removing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends hint at plummeting home values, realize that real estate is local. Your neighborhood may not be adopting the national trends and/or your home could have acquired equity before things settled down.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. It's an appraiser's job to know the market dynamics of their area. At Higdon & Associates, we're experts at pinpointing value trends in Antioch, Contra Costa County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will often drop the PMI with little anxiety. At that time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: