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 risk is oftentimes only the remainder between the home value and the amount due on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, reselling the home, and typical value variations on the chance that a purchaser doesn't pay.
The market was accepting down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender handle the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI protects the lender in the event a borrower is unable to pay on the loan and the value of the home 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 payment and generally isn't even tax deductible. Opposite from a piggyback loan where the lender takes in all the deficits, PMI is beneficial for the lender because they secure the money, and they get paid 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 home owners can refrain from paying PMI
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Keen homeowners can get off the hook a little early. The law pledges that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent.
It can take countless years to get to the point where the principal is just 20% of the original loan amount, so it's essential to know how your home has grown in value. After all, every bit of appreciation you've achieved over time counts towards dismissing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold? Even when nationwide trends signify decreasing home values, realize that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home may have secured equity before things simmered down.
The toughest thing for many homeowners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can surely help. It's an appraiser's job to recognize the market dynamics of their area. At TNT Appraisal MN, we know when property values have risen or declined. We're masters at determining 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 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: