Have equity in your home? Want a lower payment? An appraisal from Godwin Appraisals can help you get rid of your PMI.It's generally inferred that a 20% down payment is the standard when getting a mortgage. Considering the risk for the lender is generally only the difference between the home value and the amount remaining on the loan, the 20% supplies a nice cushion against the costs of foreclosure, selling the home again, and regular value changes in the event a borrower defaults.During the recent mortgage upturn of the mid 2000s, it became common to see lenders only asking for down payments of 10, 5 or even 0 percent. A lender is able to handle the added risk of the low down payment with Private Mortgage Insurance or PMI. This added policy takes care of the lender in case a borrower is unable to pay on the loan and the market price of the home is less than what the borrower still owes 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 collect the money, and they are covered if the borrower is unable to pay, as opposed to a piggyback loan where the lender absorbs all the deficits.
How can a home owner prevent paying PMI?The Homeowners Protection Act of 1998 forces the lenders on the majority of loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law states that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent. So, keen home owners can get off the hook a little early.It can take many years to get to the point where the principal is just 80% of the initial amount of the loan, so it's essential to know how your North Carolina home has grown in value. After all, any appreciation you've acquired over the years counts towards removing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Your neighborhood may not adhere to national trends and/or your home could have secured equity before the economy simmered down. So even when nationwide trends indicate a reduction in home values, you should understand that real estate is local. The difficult thing for many homeowners to figure out is just when their home's equity rises above the 20% point. An accredited, North Carolina licensed real estate appraiser can definitely help. It's an appraiser's job to keep up with the market dynamics of their area. At Godwin Appraisals, we're masters at analyzing value trends in Erwin, Harnett County, and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will often do away with the PMI with little trouble. At which 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: Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year
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