Have equity in your home? Want a lower payment? An appraisal from Realist Appraisal Services can help you get rid of your PMI.A 20% down payment is typically accepted when getting a mortgage. The lender's only liability is generally just the difference between the home value and the amount remaining on the loan, so the 20% provides a nice buffer against the charges of foreclosure, selling the home again, and natural value fluctuations in the event a purchaser doesn't pay.
The market was working with 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 manage the added risk of the low down payment with Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower defaults on the loan and the value of the property is lower than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and on many occasions isn't even tax deductible, PMI can be expensive to a borrower. It's money-making for the lender because they secure the money, and they get the money if the borrower is unable to pay, as opposed to a piggyback loan where the lender takes in all the costs.
How buyers can prevent bearing the expense of PMIThe Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Keen homeowners can get off the hook a little earlier. The law stipulates that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent.
Because it can take a significant number of years to arrive at the point where the principal is only 80% of the initial amount borrowed, it's crucial to know how your Michigan home has appreciated in value. After all, any appreciation you've accomplished over the years counts towards removing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Your neighborhood may not adhere to national trends and/or your home might have acquired equity before things declined. So even when nationwide trends forecast decreasing home values, you should know most importantly that real estate is local.
The hardest thing for almost all homeowners to determine is whether their home equity has exceeded the 20% point. A certified, Michigan licensed real estate appraiser can surely help. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Realist Appraisal Services, we know when property values have risen or declined. We're masters at recognizing value trends in Fenton, Genesee County, and surrounding areas. When faced with information from an appraiser, the mortgage company will often cancel the PMI with little effort. At which time, the homeowner 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