Have equity in your home? Want a lower payment? An appraisal from Provident Appraisal & Consulting Co. can help you get rid of your PMI.It's widely known that a 20% down payment is common when getting a mortgage. The lender's liability is usually only the remainder between the home value and the amount due on the loan, so the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and natural value fluctuations in the event a purchaser defaults.Lenders were taking down payments as low as 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. How does a lender manage the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI protects the lender if a borrower doesn't pay on the loan and the worth of the property is lower than the balance of the loan. Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and often isn't even tax deductible, PMI can be pricey to a borrower. Unlike a piggyback loan where the lender takes in all the losses, PMI is profitable for the lender because they acquire the money, and they get paid if the borrower defaults.
How can a buyer keep from paying PMI?The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law states that, upon request of the homeowner, the PMI must be released when the principal amount equals only 80 percent. So, savvy home owners can get off the hook ahead of time.It can take a significant number of years to reach the point where the principal is only 80% of the initial amount borrowed, so it's crucial to know how your Utah home has increased in value. After all, any appreciation you've accomplished over the years counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Your neighborhood might not adhere to national trends and/or your home might have secured equity before the economy cooled off. So even when nationwide trends forecast decreasing home values, you should know most importantly that real estate is local. The hardest thing for most homeowners to figure out is just when their home's equity rises above if their home equity has exceeded the 20% point. A certified, Utah licensed real estate appraiser can definitely help. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Provident Appraisal & Consulting Co., we're experts at pinpointing value trends in SLC, Davis County, and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will generally drop the PMI with little effort. At that time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year
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