Have equity in your home? Want a lower payment? An appraisal from Appraisal Associates of Beaufort can help you get rid of your PMI.When getting a mortgage, a 20% down payment is usually the standard. The lender's risk is often only the remainder between the home value and the amount outstanding on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, reselling the home, and regular value variations on the chance that a borrower doesn't pay.
During the recent mortgage boom of the last decade, it was common to see lenders reducing down payments to 10, 5 or sometimes 0 percent. A lender is able to manage the added risk of the small down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower defaults on the loan and the market price of the home is less than what is owed on the loan.
PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and many times isn't even tax deductible. It's lucrative for the lender because they collect the money, and they get paid if the borrower is unable to pay, unlike a piggyback loan where the lender consumes all the costs.
How can homebuyers keep from paying PMI?The Homeowners Protection Act of 1998 makes the lenders on the majority of loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Keen home owners can get off the hook a little earlier. The law guarantees that, at the request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent.
It can take several years to get to the point where the principal is just 80% of the initial amount of the loan, so it's necessary to know how your South Carolina home has appreciated in value. After all, all of the appreciation you've accomplished over the years counts towards abolishing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not follow national trends and/or your home might have secured equity before things simmered down. So even when nationwide trends indicate a reduction in home values, you should know most importantly that real estate is local.
A certified, South Carolina licensed real estate appraiser can help homeowners figure out if their equity has exceeed the 20% point, as it's a tough thing to know. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Appraisal Associates of Beaufort, we know when property values have risen or declined. We're masters at recognizing value trends in Beaufort, Beaufort County, and surrounding areas. Faced with data from an appraiser, the mortgage company will often do away with the PMI with little anxiety. At which time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: