Have equity in your home? Want a lower payment? An appraisal from Mueller Appraisal Services can help you get rid of your PMI.
A 20% down payment is typically the standard when getting a mortgage. The lender's risk is usually only the difference between the home value and the amount due on the loan, so the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and typical value variations on the chance that a borrower defaults.
During the recent mortgage upturn of the mid 2000s, it was customary to see lenders commanding down payments of 10, 5 or often 0 percent. How does a lender endure the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower doesn't pay on the loan and the worth of the property is less than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and many times isn't even tax deductible, PMI can be pricey to a borrower. It's profitable for the lender because they secure the money, and they get the money if the borrower doesn't pay, unlike a piggyback loan where the lender takes in all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home buyers refrain from paying PMI?
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Wise home owners can get off the hook beforehand. The law states that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent.
Considering it can take many years to reach the point where the principal is only 20% of the original amount borrowed, it's crucial 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 may have acquired equity before things cooled off, so even when nationwide trends hint at plummeting home values, you should realize that real estate is local.
The difficult thing for most home owners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can certainly help. It's an appraiser's job to keep up with the market dynamics of their area. At Mueller Appraisal Services, we know when property values have risen or declined. We're masters at analyzing value trends in Plainfield, Will County and surrounding areas. When faced with data from an appraiser, the mortgage company will usually remove the PMI with little effort. At that time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: