Have equity in your home? Want a lower payment? An appraisal from TNT Appraisal MN can help you get rid of your PMI.
A 20% down payment is usually accepted when buying a house. Considering the liability for the lender is often only the remainder between the home value and the sum outstanding on the loan, the 20% adds a nice cushion against the expenses of foreclosure, reselling the home, and natural value changeson the chance that a purchaser is unable to pay.
During the recent mortgage upturn of the last decade, it was widespread to see lenders taking down payments of 10, 5 or even 0 percent. A lender is able to endure the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI guards the lender if a borrower is unable to pay on the loan and the worth of the property is less than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and many times isn't even tax deductible, PMI is costly to a borrower. It's advantageous for the lender because they collect the money, and they receive payment if the borrower is unable to pay, separate from a piggyback loan where the lender absorbs all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can buyers avoid bearing the cost of PMI?
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law designates that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, acute home owners can get off the hook a little early.
Because it can take many years to get to the point where the principal is just 20% of the initial amount borrowed, it's important to know how your home has appreciated in value. After all, all of the appreciation you've gained 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? Your neighborhood may not be reflecting the national trends and/or your home may have gained equity before things calmed down, so even when nationwide trends forecast plummeting home values, you should understand that real estate is local.
The hardest thing for almost all homeowners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can definitely help. It's an appraiser's job to keep up with the market dynamics of their area. At TNT Appraisal MN, we know when property values have risen or declined. We're experts at identifying value trends in Red Wing, Goodhue County and surrounding areas. Faced with information from an appraiser, the mortgage company will generally cancel the PMI with little effort. 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: