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 purchasing a home. Considering the risk for the lender is oftentimes only the remainder between the home value and the amount due on the loan, the 20% adds a nice cushion against the expenses of foreclosure, selling the home again, and natural value fluctuationson the chance that a purchaser defaults.
During the recent mortgage boom of the last decade, it became common to see lenders requiring down payments of 10, 5 or often 0 percent. A lender is able to manage the increased risk of the low down payment with Private Mortgage Insurance or PMI. This supplemental policy guards the lender in case a borrower doesn't pay on the loan and the value of the house is less than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and often isn't even tax deductible, PMI can be pricey to a borrower. It's beneficial for the lender because they secure the money, and they get paid if the borrower defaults, contradictory to a piggyback loan where the lender takes in all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can buyers avoid paying PMI?
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Acute home owners can get off the hook sooner than expected. The law guarantees that, upon request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent.
It can take many years to arrive at the point where the principal is only 20% of the original amount of the loan, so it's crucial to know how your home has grown in value. After all, every bit of appreciation you've gained over the years counts towards removing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Despite the fact that nationwide trends predict decreasing home values, be aware that real estate is local. Your neighborhood might not be minding the national trends and/or your home may have secured equity before things cooled off.
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 tough thing to know. It is an appraiser's job to know the market dynamics of their area. At TNT Appraisal MN, we know when property values have risen or declined. We're masters at analyzing value trends in Red Wing, Goodhue County and surrounding areas. Faced with information from an appraiser, the mortgage company will generally remove the PMI with little trouble. At that time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: