Have equity in your home? Want a lower payment? An appraisal from Midlands Appraisal Group, LLC can help you get rid of your PMI.It's widely inferred that a 20% down payment is the standard when buying a house. Considering the risk for the lender is usually only the difference between the home value and the sum due on the loan, the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and natural value variations in the event a borrower doesn't pay.
Banks were taking down payments discounted to 10, 5 and frequently 0 percent in the peak of last decade's mortgage boom. How does a lender endure the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplementary plan covers the lender if a borrower doesn't pay on the loan and the value of the property 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 monthly payment and many times isn't even tax deductible, PMI can be pricey to a borrower. Different from a piggyback loan where the lender absorbs all the damages, PMI is beneficial for the lender because they acquire the money, and they get the money if the borrower doesn't pay.
How can a home buyer prevent paying PMI?The Homeowners Protection Act of 1998 makes the lenders on the majority of loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Wise homeowners can get off the hook beforehand. The law stipulates that, upon request of the homeowner, the PMI must be released when the principal amount equals just 80 percent.
Since it can take many years to reach the point where the principal is just 80% of the initial amount borrowed, it's important to know how your South Carolina home has grown in value. After all, any appreciation you've gained over time counts towards dismissing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Your neighborhood might not adhere to national trends and/or your home may have gained equity before things simmered down. So even when nationwide trends signify decreasing home values, you should realize that real estate is local.
The difficult thing for many people to determine is whether their home equity has exceeded the 20% point. An accredited, South Carolina licensed real estate appraiser can surely help. As appraisers, it's our job to recognize the market dynamics of our area. At Midlands Appraisal Group, LLC, we're experts at pinpointing value trends in Camden, Kershaw County, and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will often drop the PMI with little effort. At which 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: