Have equity in your home? Want a lower payment? An appraisal from THE APPRAISAL SHOP can help you get rid of your PMI.When getting a mortgage, a 20% down payment is typically the standard. The lender's liability is oftentimes only the difference between the home value and the amount outstanding on the loan, so the 20% provides a nice cushion against the costs of foreclosure, selling the home again, and natural value variations in the event a borrower is unable to pay.The market was working with down payments discounted to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI protects the lender if a borrower defaults on the loan and the value of the property is less than what the borrower still owes on the loan. Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI can be costly to a borrower. It's money-making for the lender because they secure the money, and they get the money if the borrower defaults, as opposed to a piggyback loan where the lender takes in all the costs.
How can a homeowner avoid bearing the expense of PMI?As a result of The Homeowners Protection Act of 1998, lenders are required to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount on most loans. The law states that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, savvy homeowners can get off the hook a little early.It can take a significant number of years to reach the point where the principal is just 80% of the original amount of the loan, so it's crucial to know how your Mississippi home has appreciated in value. After all, all of the appreciation you've accomplished over time counts towards abolishing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Even when nationwide trends hint at lower overall home values, understand that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home may have acquired equity before things cooled off. An accredited, Mississippi licensed real estate appraiser can help homeowners figure out if their equity has exceeed the 20% point, as it's a hard thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At THE APPRAISAL SHOP, we're masters at pinpointing value trends in Gulfport, Harrison County, and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will often cancel the PMI with little effort. At which time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year
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