Have equity in your home? Want a lower payment? An appraisal from Blue Water Appraisals can help you get rid of your PMI.
It's typically known that a 20% down payment is accepted when getting a mortgage. The lender's liability is usually only the remainder between the home value and the sum remaining on the loan, so the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and typical value fluctuations on the chance that a borrower defaults.
During the recent mortgage boom of the mid 2000s, it was widespread to see lenders taking down payments of 10, 5 or sometimes 0 percent. A lender is able to manage the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplemental policy covers the lender in the event a borrower is unable to pay on the loan and the market price of the property is lower than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and many times isn't even tax deductible, PMI can be costly to a borrower. Different from a piggyback loan where the lender consumes all the losses, PMI is money-making for the lender because they acquire the money, and they receive payment if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How buyers can keep from bearing the cost of PMI
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Wise homeowners can get off the hook ahead of time. The law stipulates that, upon request of the home owner, the PMI must be released when the principal amount reaches only 80 percent.
It can take many years to arrive at the point where the principal is just 20% of the initial loan amount, so it's crucial to know how your home has grown in value. After all, every bit of appreciation you've gained over time counts towards removing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood may not be minding the national trends and/or your home may have secured equity before things simmered down, so even when nationwide trends forecast falling home values, you should understand 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 difficult thing to know. As appraisers, it's our job to know the market dynamics of our area. At Blue Water Appraisals, we're masters at identifying value trends in Cape Coral, Lee 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 home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: