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 usually the standard. The lender's risk is usually only the remainder between the home value and the amount due on the loan, so the 20% provides a nice cushion against the expenses of foreclosure, reselling the home, and natural value changes in the event a borrower defaults.
During the recent mortgage upturn of the last decade, it was widespread to see lenders requiring down payments of 10, 5 or even 0 percent. A lender is able to manage the increased risk of the low down payment with Private Mortgage Insurance or PMI. PMI protects the lender in the event a borrower defaults on the loan and the market price of the property is lower than the balance of the loan.
PMI is costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and frequently isn't even tax deductible. Separate from a piggyback loan where the lender takes in all the damages, PMI is money-making for the lender because they secure the money, and they get paid if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home owners keep from bearing the expense of PMI?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically stop the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Wise homeowners can get off the hook beforehand. The law guarantees that, at the request of the home owner, the PMI must be dropped when the principal amount equals just 80 percent.
Because it can take countless years to arrive at the point where the principal is only 20% of the original amount of the loan, it's crucial to know how your home has increased in value. After all, all of the appreciation you've obtained over the years counts towards abolishing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Despite the fact that nationwide trends indicate plunging home values, be aware 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.
The toughest 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 surely help. 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 experts at identifying value trends in Red Wing, Goodhue County and surrounding areas. Faced with figures from an appraiser, the mortgage company will most often remove the PMI with little anxiety. 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: