Have equity in your home? Want a lower payment? An appraisal from WTB Appraisal Svc., LLC can help you get rid of your PMI.
When getting a mortgage, a 20% down payment is typically the standard. The lender's risk is often only the difference between the home value and the amount outstanding on the loan, so the 20% provides a nice cushion against the costs of foreclosure, selling the home again, and natural value variations on the chance that a borrower doesn't pay.
Banks were working with down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender handle the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This supplementary policy covers the lender in case a borrower defaults on the loan and the market price of the home is less than what is owed on the loan.
PMI is pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and generally isn't even tax deductible. Unlike a piggyback loan where the lender consumes all the deficits, PMI is profitable for the lender because they secure the money, and they receive payment 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 homeowners can refrain from 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 beginning loan amount. The law stipulates that, upon request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent. So, acute home owners can get off the hook a little earlier.
Because it can take many years to get to the point where the principal is just 20% of the initial amount of the loan, it's important to know how your home has appreciated in value. After all, all of the appreciation you've achieved over the years counts towards abolishing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Even when nationwide trends signify plummeting home values, be aware that real estate is local. Your neighborhood might not be following the national trends and/or your home could have acquired equity before things cooled off.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. It's an appraiser's job to keep up with the market dynamics of their area. At WTB Appraisal Svc., LLC, we know when property values have risen or declined. We're masters at recognizing value trends in Dunkirk, Calvert County and surrounding areas. When faced with data from an appraiser, the mortgage company will most often drop the PMI with little effort. At that time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: