Let Transparent Appraisals LLC. help you figure out if you can eliminate your PMIIt's widely inferred that a 20% down payment is common when buying a house. Because the risk for the lender is generally only the difference between the home value and the amount due on the loan, the 20% provides a nice cushion against the costs of foreclosure, selling the home again, and natural value changesin the event a borrower is unable to pay. During the recent mortgage upturn of the last decade, it was customary to see lenders taking down payments of 10, 5 or even 0 percent. How does a lender endure the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This supplemental plan covers the lender in case a borrower doesn't pay on the loan and the market price of the home is lower than the balance of the loan. Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and often isn't even tax deductible, PMI is pricey to a borrower. It's favorable for the lender because they obtain the money, and they get the money if the borrower doesn't pay, different from a piggyback loan where the lender takes in all the costs. 
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI. How can homeowners prevent paying PMI?With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law states that, upon request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent. So, wise homeowners can get off the hook a little earlier. It can take many years to arrive at the point where the principal is only 20% of the original loan amount, so it's essential to know how your home has appreciated in value. After all, any appreciation you've accomplished over time counts towards abolishing PMI. So why pay it after your loan balance has dropped below the 80% mark? Despite the fact that nationwide trends predict plummeting home values, understand that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home could have acquired equity before things simmered down. The difficult thing for many home owners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can surely help. As appraisers, it's our job to understand the market dynamics of our area. At Transparent Appraisals LLC., we're masters at analyzing value trends in Baton Rouge, East Baton Rouge County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will usually remove the PMI with little anxiety. At which time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: |