Have equity in your home? Want a lower payment? An appraisal from Herrenbruck Appraisals, LLC can help you get rid of your PMI.When buying a house, a 20% down payment is usually the standard. Considering the liability for the lender is usually only the remainder between the home value and the sum remaining on the loan, the 20% provides a nice buffer against the charges of foreclosure, selling the home again, and natural value variations on the chance that a purchaser doesn't pay.During the recent mortgage boom of the mid 2000s, it was common to see lenders only asking for down payments of 10, 5, 3 or even 0 percent. How does a lender handle the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower doesn't pay on the loan and the value of the house is lower than what the borrower still owes on the loan. Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and oftentimes isn't even tax deductible, PMI can be expensive to a borrower. As opposed to a piggyback loan where the lender consumes all the costs, PMI is beneficial for the lender because they secure the money, and they are covered if the borrower doesn't pay.
How can homebuyers avoid paying PMI?With the passage of The Homeowners Protection Act of 1998, lenders are obligated to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount on nearly all loans. Savvy home owners can get off the hook a little earlier. The law guarantees that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent.It can take several years to reach the point where the principal is just 80% of the original loan amount, so it's necessary to know how your Wisconsin home has appreciated in value. After all, every bit of appreciation you've accomplished over the years counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% threshold? Your neighborhood might not adhere to national trends and/or your home could have gained equity before the economy declined. So even when nationwide trends predict a reduction in home values, you should understand that real estate is local. A certified, Wisconsin licensed real estate appraiser can help homeowners figure out if their equity has exceeed the 20% point, as it's a difficult thing to know. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Herrenbruck Appraisals, LLC, we're masters at identifying value trends in Milwaukee, Milwaukee 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 usually drop the PMI with little effort. 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
|
||||||||||||||||||
