Let Branch Appraisal Services, Inc help you determine if you can get rid of your PMI
It's generally understood that a 20% down payment is the standard when getting a mortgage. Considering the liability for the lender is often only the difference between the home value and the amount due on the loan, the 20% adds a nice cushion against the expenses of foreclosure, selling the home again, and typical value changesin the event a purchaser doesn't pay.
The market was accepting down payments as low as 10, 5 and even 0 percent during the mortgage boom of the last decade. A lender is able to manage the increased risk of the small down payment with Private Mortgage Insurance or PMI. PMI covers the lender if a borrower is unable to pay on the loan and the value of the house is lower than what the borrower still owes on the loan.
PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and oftentimes isn't even tax deductible. Unlike a piggyback loan where the lender takes in all the losses, PMI is money-making for the lender because they obtain the money, and they get paid if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homebuyer prevent bearing the expense of PMI?
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Smart homeowners can get off the hook a little earlier. The law promises that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent.
It can take many years to reach the point where the principal is just 20% of the initial amount borrowed, so it's essential to know how your home has appreciated in value. After all, all of the appreciation you've accomplished over time counts towards abolishing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Even when nationwide trends predict plummeting home values, be aware that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home may have gained equity before things simmered down.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. As appraisers, it's our job to know the market dynamics of our area. At Branch Appraisal Services, Inc, we know when property values have risen or declined. We're experts at analyzing value trends in Indianapolis, Marion County and surrounding areas. When faced with data from an appraiser, the mortgage company will usually eliminate 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: