Have equity in your home? Want a lower payment? An appraisal from REID E. CHOATE & ASSOCIATES, LLC can help you get rid of your PMI.
It's typically known that a 20% down payment is common when purchasing a home. The lender's liability is oftentimes only the remainder between the home value and the amount remaining on the loan, so the 20% provides a nice cushion against the expenses of foreclosure, selling the home again, and typical value fluctuations in the event a purchaser defaults.
During the recent mortgage boom of the last decade, it became customary to see lenders taking 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. PMI covers the lender in case a borrower is unable to pay on the loan and the market price of the home is lower than the balance of the loan.
PMI can be expensive to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible. It's profitable for the lender because they acquire the money, and they get the money if the borrower doesn't pay, unlike a piggyback loan where the lender consumes all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homeowners keep from paying PMI?
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law pledges that, upon request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent. So, wise homeowners can get off the hook a little earlier.
Because it can take countless years to arrive at the point where the principal is just 20% of the initial amount borrowed, it's necessary to know how your home has increased in value. After all, any appreciation you've accomplished over the years counts towards abolishing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Your neighborhood might not be adhering to the national trends and/or your home could have secured equity before things cooled off, so even when nationwide trends hint at declining home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a tough thing to know. It is an appraiser's job to keep up with the market dynamics of their area. At REID E. CHOATE & ASSOCIATES, LLC, we're experts at determining value trends in Pahoa, Hawaii County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will often drop the PMI with little anxiety. At which time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: