Have equity in your home? Want a lower payment? An appraisal from Genesis Appraisal Services can help you get rid of your PMI.A 20% down payment is usually accepted when buying a house. The lender's risk is oftentimes only the remainder between the home value and the sum outstanding on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, reselling the home, and regular value variations on the chance that a purchaser doesn't pay.During the recent mortgage boom that our country recently experienced, it became common to see lenders making deals with down payments of 10, 5, 3 or even 0 percent. How does a lender endure the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This supplemental policy covers the lender in the event a borrower doesn't pay on the loan and the value of the home is less than what is owed on the loan. Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and on many occasions isn't even tax deductible, PMI can be costly to a borrower. It's lucrative for the lender because they collect the money, and they get paid if the borrower is unable to pay, in contrast to a piggyback loan where the lender consumes all the deficits.
How can a home owner avoid bearing the expense of PMI?The Homeowners Protection Act of 1998 forces the lenders on the majority of loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law guarantees that, upon request of the homeowner, the PMI must be released when the principal amount equals just 80 percent. So, wise home owners can get off the hook a little early.Since it can take several years to get to the point where the principal is only 80% of the original amount borrowed, it's essential to know how your Ohio home has appreciated in value. After all, any appreciation you've obtained over the years counts towards removing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Your neighborhood may not follow national trends and/or your home may have secured equity before the economy cooled off. So even when nationwide trends predict falling home values, you should realize that real estate is local. A certified, Ohio licensed real estate appraiser can help homeowners figure out if their equity has reached the 20% point, as it's a hard thing to know. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Genesis Appraisal Services, we know when property values have risen or declined. We're masters at identifying value trends in Newport, Montgomery County, and surrounding areas. Faced with data from an appraiser, the mortgage company will usually remove the PMI with little trouble. At which time, the home owner can delight in 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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