Have equity in your home? Want a lower payment? An appraisal from Bock Appraisal Services can help you get rid of your PMI.A 20% down payment is usually the standard when purchasing a home. Considering the liability for the lender is usually only the difference between the home value and the sum due on the loan, the 20% provides a nice cushion against the costs of foreclosure, reselling the home, and typical value variations in the event a purchaser defaults.
Banks were taking down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the added risk of the minimal down payment with Private Mortgage Insurance or PMI. This additional policy protects 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.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible, PMI can be pricey to a borrower. It's profitable for the lender because they secure the money, and they receive payment if the borrower is unable to pay, separate from a piggyback loan where the lender absorbs all the costs.
How can buyers refrain from bearing the expense of PMI?The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Smart home owners can get off the hook a little early. The law pledges that, at the request of the home owner, the PMI must be released when the principal amount equals just 80 percent.
It can take many years to arrive at the point where the principal is just 80% of the initial loan amount, so it's crucial to know how your North Carolina home has appreciated in value. After all, any 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? Even when nationwide trends predict lower overall home values, be aware that real estate is local. Your neighborhood may not be following the national trends and/or your home might have secured equity before things simmered down.
The toughest thing for almost all people to figure out is just when their home's equity rises above the 20% point. An accredited, North Carolina licensed real estate appraiser can certainly help. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Bock Appraisal Services, we're experts at analyzing value trends in Raleigh, Wake County, and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will often cancel the PMI with little anxiety. At that time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: