Let A. M. Appraisals help you decide if you can get rid of your PMI
A 20% down payment is typically the standard when buying a house.
Because the risk for the lender is often only the remainder between the home value and the amount due on the loan, the 20% provides a nice cushion against the expenses of foreclosure, reselling the home, and natural value fluctuations in the event a borrower doesn't pay.
During the recent mortgage upturn of the last decade, it became widespread to see lenders making deals with down payments of 10, 5 or sometimes 0 percent.
A lender is able to manage the added risk of the reduced down payment with Private Mortgage Insurance or PMI.
PMI covers the lender if a borrower defaults on the loan and the market price of the home is less than the balance of the loan.
PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and many times isn't even tax deductible.
It's lucrative for the lender because they acquire the money, and they get the money if the borrower defaults, different from a piggyback loan where the lender consumes all the deficits.
Is PMI a lineitem in your monthly house payment? Call A. M. Appraisals today at (803) 739-2176 or send us an e-mail. Documentation of your home's present value could save you thousands.
How can home owners avoid bearing the expense of PMI?
With the implementation of The Homeowners Protection Act of 1998, lenders are forced to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount on most loans.
Wise homeowners can get off the hook a little earlier. The law promises that, at the request of the home owner, the PMI must be released when the principal amount reaches just 80 percent.
Because it can take several years to arrive at the point where the principal is only 80% of the original loan amount, it's important to know how your South Carolina home has grown in value.
After all, any appreciation you've obtained over time counts towards removing PMI. So why pay it after the balance of your loan has dropped below the 80% mark?
Even when nationwide trends indicate falling home values, understand that real estate is local. Your neighborhood might not be adopting the national trends and/or your home may have acquired equity before things simmered down.
The hardest thing for almost all people to determine is just when their home's equity goes over the 20% point. An accredited, South Carolina licensed real estate appraiser can definitely help.
It is an appraiser's job to understand the market dynamics of their area.
At A. M. Appraisals, we know when property values have risen or declined. We're masters at recognizing value trends in West Columbia, Lexington County, and surrounding areas.
Faced with figures from an appraiser, the mortgage company will generally remove the PMI with little trouble. At that time, the homeowner can enjoy the savings from that point on.
The savings from getting rid of your PMI pays for the appraisal in no time. A. M. Appraisals has years of experience with value trends in West Columbia and Lexington County. Contact us today.
Want to learn more about PMI and the Homeowners Protection Act? Click this link:
