Have equity in your home? Want a lower payment? An appraisal from Coker Appraisers, Inc. can help you get rid of your PMI.
When getting a mortgage, a 20% down payment is typically the standard. The lender's risk is usually only the remainder between the home value and the sum outstanding on the loan, so the 20% adds a nice buffer against the costs of foreclosure, reselling the home, and regular value variations in the event a purchaser doesn't pay.
During the recent mortgage boom of the mid 2000s, it was common to see lenders commanding down payments of 10, 5 or even 0 percent. A lender is able to handle the additional risk of the small down payment with Private Mortgage Insurance or PMI. This additional policy protects the lender if a borrower is unable to pay on the loan and the worth of the house is less than what the borrower still owes on the loan.
PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and often isn't even tax deductible. Separate from a piggyback loan where the lender consumes all the damages, PMI is lucrative for the lender because they acquire the money, and they get paid if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home buyers can avoid bearing the expense of PMI
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically cease the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law guarantees that, at the request of the home owner, the PMI must be released when the principal amount equals just 80 percent. So, savvy home owners can get off the hook a little earlier.
It can take many years to get to the point where the principal is just 20% of the initial loan amount, so it's necessary to know how your home has increased in value. After all, all of the appreciation you've accomplished over the years counts towards abolishing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Even when nationwide trends forecast decreasing home values, understand that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home might have secured equity before things simmered down.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. It is an appraiser's job to keep up with the market dynamics of their area. At Coker Appraisers, Inc., we know when property values have risen or declined. We're masters at analyzing value trends in Orange, Hardin County and surrounding areas. When faced with figures from an appraiser, the mortgage company will most often drop the PMI with little anxiety. At that time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: