Have equity in your home? Want a lower payment? An appraisal from R.M. Conrad & Associates, Inc. can help you get rid of your PMI.
A 20% down payment is typically the standard when buying a house. Considering the risk for the lender is generally only the remainder between the home value and the sum outstanding on the loan, the 20% adds a nice buffer against the charges of foreclosure, selling the home again, and regular value fluctuationson the chance that a borrower defaults.
The market was accepting down payments down to 10, 5 and often 0 percent during the mortgage boom of the last decade. A lender is able to handle the increased risk of the low down payment with Private Mortgage Insurance or PMI. This added plan covers the lender in case a borrower defaults on the loan and the market price of the home is lower than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and many times isn't even tax deductible, PMI is costly to a borrower. Contradictory to a piggyback loan where the lender absorbs all the damages, PMI is favorable for the lender because they obtain the money, and they get the money if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homebuyer keep from paying PMI?
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Savvy homeowners can get off the hook beforehand. The law stipulates that, upon request of the home owner, the PMI must be released when the principal amount reaches just 80 percent.
Since it can take countless years to get to the point where the principal is just 20% of the initial amount of the loan, it's essential to know how your home has appreciated in value. After all, all of the appreciation you've acquired 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 may not be heeding the national trends and/or your home might have acquired equity before things settled down, so even when nationwide trends signify plunging home values, you should realize that real estate is local.
The hardest thing for most homeowners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can certainly help. As appraisers, it's our job to know the market dynamics of our area. At R.M. Conrad & Associates, Inc., we're experts at identifying value trends in West Chester, Chester County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will generally eliminate the PMI with little trouble. At that time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: