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 buying a house, a 20% down payment is typically the standard. Considering the risk for the lender is usually only the difference between the home value and the amount outstanding on the loan, the 20% provides a nice cushion against the charges of foreclosure, reselling the home, and typical value fluctuationson the chance that a borrower is unable to pay.
During the recent mortgage boom of the last decade, it was customary to see lenders taking down payments of 10, 5 or sometimes 0 percent. A lender is able to handle the added risk of the small down payment with Private Mortgage Insurance or PMI. This additional policy guards the lender in the event a borrower doesn't pay on the loan and the market price of the house is lower than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI can be pricey to a borrower. It's lucrative for the lender because they secure the money, and they receive payment if the borrower doesn't pay, opposite from a piggyback loan where the lender takes in all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home buyers can refrain from paying PMI
The Homeowners Protection Act of 1998 obligates 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. The law promises that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent. So, savvy homeowners can get off the hook a little early.
It can take many years to reach the point where the principal is just 20% of the initial loan amount, so it's essential to know how your home has grown in value. After all, any appreciation you've achieved over the years counts towards dismissing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Despite the fact that nationwide trends predict plummeting home values, be aware that real estate is local. Your neighborhood might not be heeding the national trends and/or your home could have acquired equity before things simmered down.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. It's 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 information from an appraiser, the mortgage company will often do away with the PMI with little trouble. 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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