Have equity in your home? Want a lower payment? An appraisal from Ashar Property Appraisals can help you get rid of your PMI.A 20% down payment is usually the standard when buying a house. Because the liability for the lender is usually only the difference between the home value and the sum due on the loan, the 20% supplies a nice cushion against the costs of foreclosure, reselling the home, and natural value variations on the chance that a purchaser doesn't pay.
The market was accepting down payments as low as 10, 5 and frequently 0 percent in the peak of last decade's mortgage boom. A lender is able to endure the increased risk of the low down payment with Private Mortgage Insurance or PMI. PMI protects the lender in the event a borrower doesn't pay on the loan and the market price of the property is less than what the borrower still owes on the loan.
PMI can be expensive to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and oftentimes isn't even tax deductible. It's profitable for the lender because they secure the money, and they get paid if the borrower defaults, separate from a piggyback loan where the lender absorbs all the damages.
How can a home buyer avoid paying PMI?The Homeowners Protection Act of 1998 obligates the lenders on the majority of loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law stipulates that, at the request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent. So, smart homeowners can get off the hook a little early.
Considering it can take several years to reach the point where the principal is just 80% of the original loan amount, it's important to know how your Missouri home has increased in value. After all, every bit of appreciation you've gained over the years counts towards abolishing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends indicate lower overall home values, understand that real estate is local. Your neighborhood may not be heeding the national trends and/or your home could have acquired equity before things cooled off.
The difficult thing for most consumers to figure out is whether their home equity has exceeded the 20% point. An accredited, Missouri licensed real estate appraiser can definitely help. As appraisers, it's our job to know the market dynamics of our area. At Ashar Property Appraisals, we're masters at pinpointing value trends in St. Louis, Saint Louis 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 often drop the PMI with little trouble. 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: