Have equity in your home? Want a lower payment? An appraisal from TNT Appraisal MN can help you get rid of your PMI.
When getting a mortgage, a 20% down payment is typically the standard. The lender's liability is usually only the difference between the home value and the amount remaining on the loan, so the 20% provides a nice buffer against the charges of foreclosure, selling the home again, and typical value fluctuations on the chance that a purchaser defaults.
During the recent mortgage boom of the last decade, it was customary to see lenders commanding down payments of 10, 5 or often 0 percent. A lender is able to manage the added risk of the low down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower doesn't pay on the loan and the market price of the house is less than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and frequently isn't even tax deductible, PMI can be expensive to a borrower. It's money-making for the lender because they acquire the money, and they get the money if the borrower is unable to pay, separate from a piggyback loan where the lender absorbs all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home owners refrain from bearing the cost of PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law pledges that, upon request of the homeowner, the PMI must be released when the principal amount equals just 80 percent. So, keen home owners can get off the hook a little earlier.
It can take many years to get to the point where the principal is just 20% of the initial amount of the loan, so it's necessary to know how your home has increased in value. After all, every bit of appreciation you've gained over the years counts towards removing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends hint at decreasing home values, understand that real estate is local. Your neighborhood may not be heeding the national trends and/or your home might have secured equity before things settled down.
A certified, 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. As appraisers, it's our job to understand the market dynamics of our area. At TNT Appraisal MN, we know when property values have risen or declined. We're masters at identifying value trends in Red Wing, Goodhue County and surrounding areas. When faced with figures from an appraiser, the mortgage company will usually eliminate the PMI with little anxiety. At that time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: