Have equity in your home? Want a lower payment? An appraisal from Appraisal Express HI, LLC can help you get rid of your PMI.
When getting a mortgage, a 20% down payment is typically the standard. Since the liability for the lender is often only the difference between the home value and the amount due on the loan, the 20% supplies a nice cushion against the expenses of foreclosure, selling the home again, and regular value changesin the event a borrower defaults.
Banks were taking down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplemental plan takes care of the lender if a borrower doesn't pay on the loan and the market price of the home 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 generally isn't even tax deductible, PMI is costly to a borrower. It's beneficial for the lender because they secure the money, and they receive payment if the borrower is unable to pay, different from a piggyback loan where the lender consumes all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homeowner prevent bearing the expense of PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law stipulates that, at the request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent. So, smart home owners can get off the hook a little earlier.
Considering it can take countless years to reach the point where the principal is only 20% of the original loan amount, it's important to know how your home has appreciated in value. After all, any appreciation you've achieved over the years counts towards abolishing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Your neighborhood may not be heeding the national trends and/or your home may have gained equity before things cooled off, so even when nationwide trends indicate plunging home values, you should understand that real estate is local.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. As appraisers, it's our job to understand the market dynamics of our area. At Appraisal Express HI, LLC, we're masters at recognizing value trends in Kihei, Maui County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will usually do away with the PMI with little effort. At that time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: