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 typically accepted when buying a house. Considering the liability for the lender is generally only the difference between the home value and the sum remaining on the loan, the 20% provides a nice cushion against the expenses of foreclosure, selling the home again, and natural value variationson the chance that a borrower defaults.
During the recent mortgage upturn of the last decade, it was common to see lenders requiring down payments of 10, 5 or often 0 percent. How does a lender handle the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This supplemental plan protects the lender if a borrower defaults on the loan and the market price of the property is less than what is owed on the loan.
PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and often isn't even tax deductible. Unlike a piggyback loan where the lender consumes all the losses, PMI is advantageous for the lender because they acquire 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 can a homebuyer refrain from paying PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law states that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent. So, keen homeowners can get off the hook a little earlier.
It can take countless years to reach the point where the principal is only 20% of the initial amount borrowed, so it's necessary to know how your home has grown in value. After all, any appreciation you've achieved over the years counts towards removing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Despite the fact that nationwide trends indicate declining home values, understand that real estate is local. Your neighborhood might not be heeding the national trends and/or your home might have secured equity before things settled down.
The difficult thing for most home owners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can certainly help. As appraisers, it's our job to keep up with the market dynamics of our area. At TNT Appraisal MN, we know when property values have risen or declined. We're experts at analyzing value trends in Red Wing, Goodhue County and surrounding areas. Faced with data from an appraiser, the mortgage company will often eliminate the PMI with little trouble. At which 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: