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 purchasing a home, a 20% down payment is typically the standard. The lender's risk is oftentimes only the remainder between the home value and the amount outstanding on the loan, so the 20% supplies a nice buffer against the charges of foreclosure, reselling the home, and regular value fluctuations in the event a borrower is unable to pay.
Lenders were taking down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender endure the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This additional policy protects the lender in the event a borrower is unable to pay on the loan and the market price of the home is less than what is owed on the loan.
PMI can be expensive to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and many times isn't even tax deductible. Unlike a piggyback loan where the lender takes in all the costs, PMI is lucrative for the lender because they obtain the money, and they get paid 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 prevent bearing the cost of PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Wise homeowners can get off the hook ahead of time. The law pledges that, upon request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent.
Since it can take many years to get to the point where the principal is just 20% of the original amount borrowed, it's necessary to know how your home has increased in value. After all, any appreciation you've gained over time counts towards abolishing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Your neighborhood may not be heeding the national trends and/or your home might have secured equity before things calmed down, so even when nationwide trends forecast plummeting home values, you should understand that real estate is local.
The difficult thing for most home owners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can certainly help. It is an appraiser's job to know the market dynamics of their area. At The August Group Inc., we know when property values have risen or declined. We're experts at determining value trends in St Louis, Saint Louis County and surrounding areas. When faced with data from an appraiser, the mortgage company will generally drop the PMI with little effort. 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:
There was a problem returning the RSS feed.