Have equity in your home? Want a lower payment? An appraisal from Tradition Appraisal Group can help you get rid of your PMI.A 20% down payment is typically the standard when purchasing a home. The lender's risk is usually only the remainder between the home value and the amount outstanding on the loan, so the 20% supplies a nice buffer against the expenses of foreclosure, reselling the home, and typical value changes on the chance that a borrower defaults.
The market was working with down payments dropping to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the added risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower doesn't pay on the loan and the value of the home is lower than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and often isn't even tax deductible, PMI is pricey to a borrower. Instead of a piggyback loan where the lender consumes all the losses, PMI is beneficial for the lender because they obtain the money, and they are covered if the borrower doesn't pay.
How home buyers can keep from bearing the expense of PMIThe Homeowners Protection Act of 1998 makes the lenders on most loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Acute home owners can get off the hook a little early. The law stipulates that, at the request of the homeowner, the PMI must be released when the principal amount equals only 80 percent.
Since it can take a significant number of years to reach the point where the principal is just 80% of the original amount of the loan, it's essential to know how your Connecticut home has appreciated in value. After all, all of the appreciation you've gained over time counts towards removing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Even when nationwide trends predict declining home values, realize that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home may have acquired equity before things simmered down.
An accredited, Connecticut licensed real estate appraiser can help home owners figure out just when their home's equity goes over the 20% point, as it's a tough thing to know. It's an appraiser's job to recognize the market dynamics of their area. At Tradition Appraisal Group, we're experts at pinpointing value trends in Meriden, Connecticut, and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will most often eliminate the PMI with little effort. At that time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: