Have equity in your home? Want a lower payment? An appraisal from Crowe Appraisals can help you get rid of your PMI.
It's largely known that a 20% down payment is common when getting a mortgage. The lender's liability is usually only the remainder between the home value and the amount due on the loan, so the 20% adds a nice cushion against the charges of foreclosure, reselling the home, and typical value changes in the event a borrower doesn't pay.
During the recent mortgage boom of the mid 2000s, it became common to see lenders taking down payments of 10, 5 or often 0 percent. A lender is able to endure the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower defaults on the loan and the value of the house is lower than the loan balance.
PMI is costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and often isn't even tax deductible. It's money-making for the lender because they collect the money, and they get paid if the borrower is unable to pay, contradictory to a piggyback loan where the lender takes in all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home owner keep from bearing the expense of PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Wise home owners can get off the hook sooner than expected. The law promises that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent.
It can take many years to arrive at the point where the principal is only 20% of the original amount of the loan, so it's important to know how your home has increased in value. After all, all of the appreciation you've achieved over time counts towards abolishing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Your neighborhood may not be heeding the national trends and/or your home might have secured equity before things settled down, so even when nationwide trends predict decreasing home values, you should realize that real estate is local.
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 tough thing to know. It's an appraiser's job to recognize the market dynamics of their area. At Crowe Appraisals, we know when property values have risen or declined. We're experts at determining value trends in Oklahoma City, Oklahoma County and surrounding areas. Faced with data from an appraiser, the mortgage company will most often drop the PMI with little anxiety. At which time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: