Let Greenville Appraisal Services help you figure out if you can get rid of your PMI
When buying a house, a 20% down payment is typically the standard. Since the liability for the lender is generally only the difference between the home value and the amount outstanding on the loan, the 20% provides a nice cushion against the charges of foreclosure, reselling the home, and regular value fluctuationsin the event a borrower defaults.
Banks were taking down payments as low as 10, 5 and even 0 percent during the mortgage boom of the last decade. How does a lender handle the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This additional plan guards the lender in case a borrower doesn't pay on the loan and the value 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 rolled into the mortgage payment and many times isn't even tax deductible. It's advantageous for the lender because they obtain the money, and they get the money if the borrower defaults, contradictory to a piggyback loan where the lender absorbs 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 a homeowner keep from bearing the expense of PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law promises that, upon request of the homeowner, the PMI must be released when the principal amount equals just 80 percent. So, savvy homeowners can get off the hook ahead of time.
It can take countless years to get to the point where the principal is only 20% of the initial loan amount, so it's necessary to know how your home has increased in value. After all, every bit of appreciation you've acquired over the years counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Your neighborhood might not be reflecting the national trends and/or your home may have secured equity before things settled down, so even when nationwide trends forecast falling home values, you should understand that real estate is local.
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 tough thing to know. As appraisers, it's our job to understand the market dynamics of our area. At Greenville Appraisal Services, we're masters at determining value trends in Greenville, Anderson County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will often do away with 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: