Have equity in your home? Want a lower payment? An appraisal from Joseph A. Robb & Associates can help you get rid of your PMI.When buying a house, a 20% down payment is typically the standard. The lender's only exposure is generally just the remainder between the home value and the balance due on the loan, so the 20% provides a nice buffer against the costs of foreclosure, reselling the home, and regular value variations in the event a borrower doesn't pay.
Banks were taking down payments discounted to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. A lender is able to manage the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. This added policy covers the lender in case a borrower defaults on the loan and the value of the house is less than what is owed on the loan.
PMI can be expensive to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and often isn't even tax deductible. Different from a piggyback loan where the lender takes in all the losses, PMI is advantageous for the lender because they acquire the money, and they are covered if the borrower is unable to pay.
How can home buyers refrain from bearing the cost of PMI?As a result of The Homeowners Protection Act of 1998, lenders are required to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount on nearly all loans. Savvy home owners can get off the hook a little earlier. The law guarantees that, upon request of the homeowner, the PMI must be released when the principal amount equals only 80 percent.
Because it can take many years to get to the point where the principal is only 80% of the original amount borrowed, it's important to know how your North Carolina home has appreciated in value. After all, any appreciation you've gained over time counts towards removing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Even when nationwide trends indicate falling home values, realize that real estate is local. Your neighborhood might not be following the national trends and/or your home might have acquired equity before things simmered down.
An accredited, North Carolina licensed real estate appraiser can help homeowners figure out just when their home's equity rises above the 20% point, as it's a hard thing to know. As appraisers, it's our job to know the market dynamics of our area. At Joseph A. Robb & Associates, we're experts at recognizing value trends in Wilmington, New Hanover County, and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will often cancel the PMI with little trouble. At that time, the home owner can relish the savings from that point on.
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