Have equity in your home? Want a lower payment? An appraisal from ACP Valuations can help you get rid of your PMI.
When purchasing a home, a 20% down payment is usually the standard. The lender's liability is usually only the difference between the home value and the amount due on the loan, so the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and natural value variations in the event a purchaser doesn't pay.
The market was taking down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI protects the lender if a borrower defaults on the loan and the worth of the house is less than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and often isn't even tax deductible, PMI can be expensive to a borrower. Different from a piggyback loan where the lender consumes all the deficits, PMI is beneficial for the lender because they secure the money, and they receive payment if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home owners avoid paying PMI?
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Smart home owners can get off the hook ahead of time. The law guarantees that, at the request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent.
It can take many years to arrive at 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 appreciated in value. After all, all of the appreciation you've acquired over the years counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Your neighborhood may not be heeding the national trends and/or your home might have gained equity before things settled down, so even when nationwide trends predict plummeting home values, you should understand that real estate is local.
The difficult thing for many homeowners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. As appraisers, it's our job to know the market dynamics of our area. At ACP Valuations, we know when property values have risen or declined. We're masters at identifying value trends in Wilsonville, Ada County and surrounding areas. Faced with figures from an appraiser, the mortgage company will often drop 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: