Have equity in your home? Want a lower payment? An appraisal from Marlowe Appraisal & RE Inc. can help you get rid of your PMI.A 20% down payment is typically the standard when purchasing a home. The lender's liability is oftentimes only the difference between the home value and the sum outstanding on the loan, so the 20% provides a nice cushion against the expenses of foreclosure, selling the home again, and natural value fluctuations in the event a purchaser doesn't pay.
During the recent mortgage upturn of the last decade, it became customary to see lenders reducing down payments to 10, 5 or even 0 percent. How does a lender endure the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This added plan covers the lender if a borrower is unable to pay on the loan and the value of the house is lower than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and oftentimes isn't even tax deductible, PMI can be costly to a borrower. It's advantageous for the lender because they obtain the money, and they get paid if the borrower is unable to pay, as opposed to a piggyback loan where the lender absorbs all the deficits.
How can buyers avoid bearing the cost of PMI?The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Wise homeowners can get off the hook a little earlier. The law stipulates that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent.
It can take a significant number of years to get to the point where the principal is just 80% of the initial loan amount, so it's essential to know how your Ohio home has appreciated in value. After all, every bit of appreciation you've acquired over the years counts towards dismissing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold? Even when nationwide trends signify declining home values, realize that real estate is local. Your neighborhood may not be adopting the national trends and/or your home may have secured equity before things simmered down.
The toughest thing for most homeowners to determine is just when their home's equity goes over the 20% point. An accredited, Ohio licensed real estate appraiser can certainly help. It's an appraiser's job to know the market dynamics of their area. At Marlowe Appraisal & RE Inc., we know when property values have risen or declined. We're masters at determining value trends in Painesville, Lake County, and surrounding areas. Faced with data from an appraiser, the mortgage company will often remove the PMI with little effort. At which 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: