Have equity in your home? Want a lower payment? An appraisal from A & B Tax Service can help you get rid of your PMI.
When buying a house, a 20% down payment is typically the standard. The lender's risk is generally only the remainder between the home value and the sum remaining on the loan, so the 20% supplies a nice buffer against the costs of foreclosure, selling the home again, and regular value fluctuations in the event a borrower doesn't pay.
Banks were taking down payments down to 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. How does a lender manage the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This additional policy protects the lender in case a borrower defaults on the loan and the value of the house is lower than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and oftentimes isn't even tax deductible, PMI can be costly to a borrower. Different from a piggyback loan where the lender takes in all the deficits, PMI is lucrative for the lender because they obtain the money, and they get paid if the borrower doesn't pay.
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 refrain from bearing the expense of PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Acute homeowners can get off the hook ahead of time. The law promises that, upon request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent.
It can take countless years to get to the point where the principal is only 20% of the initial amount borrowed, so it's essential to know how your home has increased in value. After all, every bit of appreciation you've obtained over time counts towards dismissing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Your neighborhood may not be adhering to the national trends and/or your home might have gained equity before things settled down, so even when nationwide trends hint at plunging home values, you should understand that real estate is local.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. It is an appraiser's job to know the market dynamics of their area. At A & B Tax Service, we're experts at determining value trends in Sturtevant, Racine County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will often do away with the PMI with little anxiety. At that time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: