Have equity in your home? Want a lower payment? An appraisal from Kordik & Associates, Inc. can help you get rid of your PMI.
A 20% down payment is usually accepted when buying a house. The lender's liability is generally only the remainder between the home value and the amount remaining on the loan, so the 20% adds a nice buffer against the costs of foreclosure, reselling the home, and natural value variations in the event a borrower defaults.
The market was working with down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender handle the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This supplemental plan takes care of the lender in case a borrower defaults on the loan and the market price of the home is less than the loan balance.
PMI is costly to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and often isn't even tax deductible. Contradictory to a piggyback loan where the lender consumes all the costs, PMI is favorable for the lender because they secure the money, and they get the money if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homebuyers refrain from bearing the cost of PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Acute home owners can get off the hook beforehand. The law stipulates that, at the request of the homeowner, the PMI must be released when the principal amount equals just 80 percent.
Since it can take countless years to arrive at the point where the principal is just 20% of the initial amount of the loan, it's crucial to know how your home has grown in value. After all, every bit of appreciation you've obtained over time counts towards dismissing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Despite the fact that nationwide trends predict plummeting home values, realize that real estate is local. Your neighborhood might not be heeding the national trends and/or your home may have acquired equity before things settled down.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. It is an appraiser's job to keep up with the market dynamics of their area. At Kordik & Associates, Inc., we know when property values have risen or declined. We're masters at identifying value trends in Elmhurst, Dupage County and surrounding areas. When faced with data from an appraiser, the mortgage company will generally do away with the PMI with little anxiety. At which time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: