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.
A 20% down payment is usually accepted when getting a mortgage. The lender's liability is usually only the difference between the home value and the amount due on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, reselling the home, and regular value changes on the chance that a purchaser defaults.
During the recent mortgage upturn of the mid 2000s, it became widespread to see lenders commanding down payments of 10, 5 or even 0 percent. A lender is able to handle the additional risk of the low down payment with Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower doesn't pay on the loan and the market price of the house is less than what is owed on the loan.
PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and frequently isn't even tax deductible. It's beneficial for the lender because they collect the money, and they get the money if the borrower defaults, unlike a piggyback loan where the lender consumes all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home buyer refrain from paying PMI?
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Savvy homeowners can get off the hook a little earlier. The law states that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent.
It can take many years to get to the point where the principal is only 20% of the initial amount borrowed, so it's important to know how your home has appreciated in value. After all, all of the appreciation you've gained over the years counts towards removing PMI. So why pay it after your loan balance has dropped below the 80% mark? Despite the fact that nationwide trends forecast declining home values, be aware that real estate is local. Your neighborhood may not be adopting the national trends and/or your home might have acquired equity before things cooled off.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At REID E. CHOATE & ASSOCIATES, LLC, we're masters at recognizing value trends in Pahoa, Hawaii County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will usually cancel the PMI with little trouble. At that time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: