Have equity in your home? Want a lower payment? An appraisal from Appraisal Dynamic can help you get rid of your PMI.It's largely inferred that a 20% down payment is the standard when buying a house. The lender's liability is oftentimes only the remainder between the home value and the balance outstanding on the loan, so the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and regular value changes on the chance that a borrower doesn't pay.
The market was taking down payments dropping to 10, 5 and even 0 percent during the mortgage boom of the last decade. A lender is able to endure the added risk of the small down payment with Private Mortgage Insurance or PMI. This additional policy protects the lender if a borrower defaults on the loan and the value of the house is less than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and oftentimes isn't even tax deductible, PMI is pricey to a borrower. Instead of a piggyback loan where the lender consumes all the costs, PMI is money-making for the lender because they secure the money, and they get the money if the borrower defaults.
How homeowners can avoid bearing the expense of PMIWith the passage of The Homeowners Protection Act of 1998, lenders are obligated to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount on nearly all loans. The law promises that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent. So, savvy homeowners can get off the hook sooner than expected.
Considering it can take many years to get to the point where the principal is just 80% of the original loan amount, it's essential to know how your Michigan home has appreciated in value. After all, any appreciation you've acquired over time counts towards dismissing PMI. So why pay it after your loan balance has dropped below the 80% mark? Your neighborhood may not follow national trends and/or your home could have gained equity before things cooled off. So even when nationwide trends hint at falling home values, you should know most importantly that real estate is local.
The difficult thing for almost all homeowners to determine is whether their home equity has exceeded the 20% point. A certified, Michigan licensed real estate appraiser can surely help. It's an appraiser's job to understand the market dynamics of their area. At Appraisal Dynamic, we know when property values have risen or declined. We're masters at pinpointing value trends in Algonac, Saint Clair County, and surrounding areas. When faced with data from an appraiser, the mortgage company will often remove the PMI with little anxiety. At that time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: