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Have equity in your home? Want a lower payment? An appraisal from Applause Appraisal can help you get rid of your PMI.
It's generally understood that a 20% down payment is common when getting a mortgage.
Because the risk for the lender is often only the difference between the home value and the amount due on the loan, the 20% provides a nice cushion against the expenses of foreclosure, selling the home again, and regular value fluctuations on the chance that a borrower is unable to pay.
During the recent mortgage boom that our country recently experienced, it was widespread to see lenders making deals with down payments of 10, 5 or even 0 percent.
How does a lender endure the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI.
PMI guards the lender if a borrower is unable to pay on the loan and the value of the home is less than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and frequently isn't even tax deductible, PMI can be expensive to a borrower.
It's advantageous for the lender because they secure the money, and they get paid if the borrower defaults, separate from a piggyback loan where the lender takes in all the deficits.
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The amount you keep from dropping the PMI required when you got your mortgage pays for the appraisal in a matter of months. Nobody is more qualified than Applause Appraisal when it comes to appreciating values in the city of Decatur and Macon County. Contact us today.
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How can a homeowner keep from bearing the cost of PMI?
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount.
Smart home owners can get off the hook a little early. The law guarantees that, at the request of the home owner, the PMI must be released when the principal amount equals just 80 percent.
It can take many years to get to the point where the principal is only 80% of the initial amount borrowed, so it's necessary to know how your Illinois home has grown in value.
After all, all of the appreciation you've gained over time counts towards abolishing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold?
Your neighborhood may not conform to national trends and/or your home may have acquired equity before the economy cooled off. So even when nationwide trends forecast decreasing home values, you should realize that real estate is local.
The difficult thing for most people to determine is just when their home's equity rises above the 20% point. An accredited, Illinois licensed real estate appraiser can surely help.
As appraisers, it's our job to recognize the market dynamics of our area.
At Applause Appraisal, we know when property values have risen or declined. We're masters at identifying value trends in Decatur, Macon County, and surrounding areas.
Faced with data from an appraiser, the mortgage company will often drop the PMI with little anxiety. At which time, the homeowner can retain the savings from that point on.
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Does your monthly loan payment include a fee for PMI? Call Applause Appraisal today at (217) 791-6291 or send us an e-mail. A current appraisal could save you thousands.
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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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