Have equity in your home? Want a lower payment? An appraisal from Alaska Real Estate Appraisal can help you get rid of your PMI.
A 20% down payment is typically the standard when getting a mortgage. The lender's liability is oftentimes only the difference between the home value and the amount outstanding on the loan, so the 20% provides a nice buffer against the costs of foreclosure, reselling the home, and natural value fluctuations in the event a borrower is unable to pay.
Banks were accepting down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to endure the additional risk of the small down payment with Private Mortgage Insurance or PMI. PMI protects the lender if a borrower is unable to pay on the loan and the market price of the home is lower than what the borrower still owes on the loan.
PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and often isn't even tax deductible. Unlike a piggyback loan where the lender consumes all the costs, PMI is profitable for the lender because they collect 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 buyers can refrain from paying PMI
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Wise home owners can get off the hook ahead of time. The law designates that, upon request of the homeowner, the PMI must be released when the principal amount equals just 80 percent.
It can take many years to arrive at the point where the principal is only 20% of the original amount borrowed, so it's important to know how your home has grown in value. After all, every bit of appreciation you've achieved over the years counts towards removing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Even when nationwide trends predict falling home values, realize that real estate is local. Your neighborhood may not be following the national trends and/or your home might have gained equity before things simmered down.
The difficult thing for almost all homeowners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can certainly help. It's an appraiser's job to know the market dynamics of their area. At Alaska Real Estate Appraisal, we know when property values have risen or declined. We're experts at pinpointing value trends in Palmer, Matanuska Susitna County and surrounding areas. When faced with data from an appraiser, the mortgage company will usually drop the PMI with little anxiety. At that time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: