Have equity in your home? Want a lower payment? An appraisal from Summit City Appraisals, LLC can help you get rid of your PMI.A 20% down payment is usually the standard when getting a mortgage. The lender's only exposure is typically just the difference between the home value and the amount outstanding on the loan, so the 20% adds a nice cushion against the charges of foreclosure, selling the home again, and typical value changes in the event a borrower defaults.
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 minimal down payment with Private Mortgage Insurance or PMI. This added plan covers the lender in case a borrower is unable to pay on the loan and the value of the house is lower than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI is costly to a borrower. It's advantageous for the lender because they secure the money, and they get paid if the borrower doesn't pay, different from a piggyback loan where the lender takes in all the losses.
How can home owners keep from bearing the expense of PMI?With the passage 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 initial loan amount on most loans. Savvy home owners can get off the hook beforehand. The law pledges that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent.
Considering it can take many years to reach the point where the principal is just 80% of the initial amount borrowed, it's crucial to know how your Indiana home has increased 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? Even when nationwide trends signify decreasing home values, understand that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home could have secured equity before things simmered down.
A certified, Indiana licensed real estate appraiser can help home owners figure out 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 recognize the market dynamics of their area. At Summit City Appraisals, LLC, we know when property values have risen or declined. We're experts at identifying value trends in Fort Wayne, Allen County, and surrounding areas. Faced with figures from an appraiser, the mortgage company will often drop the PMI with little trouble. 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