Have equity in your home? Want a lower payment? An appraisal from The August Group Inc. 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 often only the difference between the home value and the sum outstanding on the loan, so the 20% provides a nice cushion against the charges of foreclosure, selling the home again, and regular value variations in the event a purchaser is unable to pay.
The market was taking down payments as low as 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender endure the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This supplemental plan guards the lender if a borrower is unable to pay on the loan and the market price of the house is less than what the borrower still owes on the loan.
PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and oftentimes isn't even tax deductible. Opposite from a piggyback loan where the lender takes in all the deficits, PMI is advantageous for the lender because they acquire the money, and they receive payment 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 can a home buyer prevent bearing the cost of PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Savvy home owners can get off the hook ahead of time. 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 many years to get to the point where the principal is only 20% of the original loan amount, so it's essential to know how your home has appreciated in value. After all, all of the appreciation you've gained over time counts towards abolishing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Your neighborhood may not be reflecting the national trends and/or your home may have gained equity before things simmered down, so even when nationwide trends predict plunging home values, you should understand that real estate is local.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. It's an appraiser's job to keep up with the market dynamics of their area. At The August Group Inc., we know when property values have risen or declined. We're masters at determining value trends in St Louis, Saint Louis County and surrounding areas. Faced with figures from an appraiser, the mortgage company will usually eliminate the PMI with little effort. At that 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:
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