Have equity in your home? Want a lower payment? An appraisal from KEY INSIGHT can help you get rid of your PMI.
A 20% down payment is usually the standard when getting a mortgage. Considering the risk for the lender is generally only the difference between the home value and the amount due on the loan, the 20% provides a nice buffer against the expenses of foreclosure, reselling the home, and typical value variationsin the event a borrower is unable to pay.
During the recent mortgage upturn of the last decade, it was widespread to see lenders requiring down payments of 10, 5 or sometimes 0 percent. A lender is able to endure the added risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI protects the lender if a borrower is unable to pay on the loan and the market price of the house is lower than the balance of the loan.
PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and oftentimes isn't even tax deductible. It's favorable for the lender because they secure the money, and they get paid if the borrower doesn't pay, unlike a piggyback loan where the lender consumes all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homebuyer prevent bearing the cost of PMI?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically stop the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Keen homeowners can get off the hook beforehand. The law stipulates that, at the request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent.
It can take countless years to reach the point where the principal is only 20% of the initial amount of the loan, so it's essential to know how your home has grown in value. After all, any appreciation you've acquired over the years counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Your neighborhood might not be following the national trends and/or your home might have gained equity before things cooled off, so even when nationwide trends predict declining home values, you should realize that real estate is local.
The hardest thing for most home owners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can surely help. As appraisers, it's our job to understand the market dynamics of our area. At KEY INSIGHT, we know when property values have risen or declined. We're experts at analyzing value trends in Rhinelander, Oneida County and surrounding areas. Faced with information from an appraiser, the mortgage company will usually cancel the PMI with little effort. 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: