Have equity in your home? Want a lower payment? An appraisal from Crowe Appraisals can help you get rid of your PMI.
A 20% down payment is typically accepted when getting a mortgage. The lender's liability is oftentimes only the remainder between the home value and the sum outstanding on the loan, so the 20% supplies a nice cushion against the costs of foreclosure, reselling the home, and natural value fluctuations on the chance that a purchaser doesn't pay.
During the recent mortgage boom of the mid 2000s, it was widespread to see lenders requiring down payments of 10, 5 or often 0 percent. A lender is able to handle the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower doesn't pay on the loan and the worth of the house is less than what the borrower still owes on the loan.
PMI is costly 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. It's money-making for the lender because they collect the money, and they receive payment if the borrower is unable to pay, opposite from a piggyback loan where the lender consumes all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home owners can avoid paying 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 equals 78 percent of the beginning loan amount. The law stipulates that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent. So, acute home owners can get off the hook a little earlier.
It can take countless years to arrive at the point where the principal is only 20% of the initial amount of the loan, so it's necessary to know how your home has appreciated in value. After all, all of the appreciation you've achieved over the years counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% mark? Despite the fact that nationwide trends forecast plunging home values, realize that real estate is local. Your neighborhood might not be following the national trends and/or your home could have gained equity before things settled down.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. As appraisers, it's our job to know the market dynamics of our area. At Crowe Appraisals, we're masters at pinpointing value trends in Oklahoma City, Oklahoma County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will often cancel the PMI with little trouble. At that 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: