Have equity in your home? Want a lower payment? An appraisal from Rob Harris can help you get rid of your PMI.A 20% down payment is typically accepted when buying a house. The lender's only risk is generally just the remainder between the home value and the sum outstanding on the loan, so the 20% provides a nice cushion against the costs of foreclosure, selling the home again, and regular value variations on the chance that a purchaser doesn't pay.The market was working with down payments discounted to 10, 5 and frequently 0 percent during the mortgage boom of the mid 2000s. A lender is able to endure the added risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower doesn't pay on the loan and the market price of the property is lower than what the borrower still owes on the loan. PMI can be costly to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and oftentimes isn't even tax deductible. Different from a piggyback loan where the lender absorbs all the damages, PMI is favorable for the lender because they obtain the money, and they receive payment if the borrower doesn't pay.
How can homebuyers avoid paying PMI?The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Keen homeowners can get off the hook sooner than expected. The law states that, at the request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent.Since it can take a significant number of years to arrive at the point where the principal is just 80% of the original loan amount, it's essential to know how your Indiana home has appreciated in value. After all, any appreciation you've acquired over time counts towards dismissing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Even when nationwide trends indicate lower overall home values, be aware that real estate is local. Your neighborhood may not be adopting the national trends and/or your home might have acquired equity before things simmered down. The difficult thing for many homeowners to figure out is whether their home equity has exceeded the 20% point. An accredited, Indiana licensed real estate appraiser can certainly help. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Rob Harris, we're masters at determining value trends in Fort Wayne, Allen 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 usually drop the PMI with little trouble. At that time, the homeowner can delight in 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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