Have equity in your home? Want a lower payment? An appraisal from DIDIER APPRAISAL can help you get rid of your PMI.A 20% down payment is typically accepted when getting a mortgage. The lender's only exposure is typically just the difference between the home value and the sum outstanding on the loan, so the 20% supplies a nice buffer against the costs of foreclosure, reselling the home, and regular value variations in the event a purchaser is unable to 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 manage the additional risk of the small down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower is unable to pay on the loan and the market price of the property is less than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and many times isn't even tax deductible, PMI is pricey to a borrower. It's lucrative for the lender because they obtain the money, and they get the money if the borrower doesn't pay, different from a piggyback loan where the lender consumes all the losses.
How can homeowners prevent bearing the expense of PMI?The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Wise home owners can get off the hook a little earlier. The law states that, at the request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent.
Because it can take many years to reach the point where the principal is only 80% of the original amount of the loan, it's essential to know how your Wisconsin home has grown in value. After all, every bit of appreciation you've obtained over the years counts towards removing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Even when nationwide trends indicate decreasing home values, realize that real estate is local. Your neighborhood might not be minding the national trends and/or your home may have acquired equity before things declined.
A certified, Wisconsin licensed real estate appraiser can help home owners figure out if their equity has made it to the 20% point, as it's a difficult thing to know. It is an appraiser's job to know the market dynamics of their area. At DIDIER APPRAISAL, we know when property values have risen or declined. We're masters at pinpointing value trends in Port Washington, Ozaukee County, and surrounding areas. When faced with data from an appraiser, the mortgage company will usually eliminate the PMI with little trouble. At which 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: