Have equity in your home? Want a lower payment? An appraisal from Las Vegas Appraisal Service, Inc. can help you get rid of your PMI.
When purchasing a home, a 20% down payment is usually the standard. The lender's liability is generally only the difference between the home value and the sum due on the loan, so the 20% supplies a nice buffer against the costs of foreclosure, selling the home again, and typical value fluctuations on the chance that a purchaser defaults.
During the recent mortgage upturn of the mid 2000s, it was common to see lenders taking down payments of 10, 5 or even 0 percent. How does a lender endure the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This additional plan guards the lender if a borrower defaults on the loan and the worth of the home is lower than the balance of the loan.
PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and frequently isn't even tax deductible. Unlike a piggyback loan where the lender takes in all the losses, PMI is advantageous for the lender because they collect the money, and they receive payment if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home owner keep from paying PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Smart home owners can get off the hook sooner than expected. The law states that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent.
It can take countless years to get to the point where the principal is only 20% of the original amount borrowed, so it's crucial to know how your home has appreciated in value. After all, every bit of appreciation you've accomplished over time counts towards abolishing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold? Your neighborhood may not be heeding the national trends and/or your home may have secured equity before things cooled off, so even when nationwide trends signify declining home values, you should understand that real estate is local.
The toughest thing for most homeowners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can certainly help. As appraisers, it's our job to recognize the market dynamics of our area. At Las Vegas Appraisal Service, Inc., we know when property values have risen or declined. We're experts at recognizing value trends in Las Vegas, Clark County and surrounding areas. Faced with figures from an appraiser, the mortgage company will usually cancel the PMI with little anxiety. 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: