Have equity in your home? Want a lower payment? An appraisal from Wickwire Appraisals Inc can help you get rid of your PMI.It's typically inferred that a 20% down payment is the standard when buying a house. Considering the liability for the lender is often only the remainder between the home value and the amount outstanding on the loan, the 20% supplies a nice buffer against the charges of foreclosure, selling the home again, and natural value variations in the event a borrower is unable to pay.
Banks were working with down payments as low as 10, 5 and even 0 percent during the mortgage boom of the last decade. A lender is able to endure the increased risk of the small down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower doesn't pay on the loan and the value of the property is less than what the borrower still owes on the loan.
PMI can be costly to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and many times isn't even tax deductible. Instead of a piggyback loan where the lender absorbs all the costs, PMI is favorable for the lender because they obtain the money, and they get paid if the borrower defaults.
How buyers can avoid bearing the cost of PMIThe Homeowners Protection Act of 1998 forces the lenders on the majority of loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Keen home owners can get off the hook ahead of time. The law designates that, at the request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent.
Considering it can take several years to reach the point where the principal is only 80% of the original amount borrowed, it's important to know how your Pennsylvania home has appreciated in value. After all, all of the appreciation you've gained over the years counts towards dismissing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Your neighborhood may not conform to national trends and/or your home may have secured equity before things simmered down. So even when nationwide trends forecast decreasing home values, you should understand that real estate is local.
A certified, Pennsylvania licensed real estate appraiser can help homeowners figure out just when their home's equity goes over the 20% point, as it's a tough thing to know. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Wickwire Appraisals Inc, I know when property values have risen or declined. I am knowledgeable at determining value trends in our surrounding areas. Faced with information from an appraiser, the mortgage company will most often eliminate 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: