Have equity in your home? Want a lower payment? An appraisal from Curran Appraisals can help you get rid of your PMI.When getting a mortgage, a 20% down payment is usually the standard. The lender's only exposure is often just the remainder between the home value and the amount outstanding on the loan, so the 20% provides a nice cushion against the expenses of foreclosure, selling the home again, and regular value changes in the event a purchaser is unable to pay.
Banks were accepting down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower is unable to pay on the loan and the market price of the home is lower than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and on many occasions isn't even tax deductible, PMI is pricey to a borrower. It's profitable for the lender because they acquire the money, and they get the money if the borrower defaults, as opposed to a piggyback loan where the lender absorbs all the deficits.
How can homeowners avoid paying PMI?The Homeowners Protection Act of 1998 makes the lenders on the majority of loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law states that, at the request of the home owner, the PMI must be released when the principal amount reaches just 80 percent. So, acute homeowners can get off the hook a little earlier.
Since it can take a significant number of years to arrive at the point where the principal is only 80% of the initial loan amount, it's crucial to know how your Minnesota home has increased in value. After all, all of the appreciation you've gained over the years counts towards dismissing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Your neighborhood might not follow national trends and/or your home may have acquired equity before things cooled off. So even when nationwide trends indicate falling home values, you should realize that real estate is local.
A certified, Minnesota licensed real estate appraiser can help home owners figure out just when their home's equity rises above the 20% point, as it's a tough thing to know. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Curran Appraisals, we're masters at analyzing value trends in Waterville, Le Sueur County, and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will often drop the PMI with little trouble. At which 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: