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Let Tim Norris & Associates help you determine if you can eliminate your PMI
When purchasing a home, a 20% down payment is typically the standard.
The lender's only risk is often just the remainder between the home value and the amount due on the loan, so the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and regular value fluctuations on the chance that a borrower is unable to pay.
The market was accepting down payments discounted to 10, 5 and frequently 0 percent during the mortgage boom of the mid 2000s.
How does a lender endure the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI.
PMI protects the lender if a borrower is unable to pay on the loan and the market price of the property is less than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and often isn't even tax deductible, PMI can be expensive to a borrower.
Separate from a piggyback loan where the lender absorbs all the losses, PMI is lucrative for the lender because they acquire the money, and they get paid if the borrower is unable to pay.
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The savings from getting rid of the PMI required when you got your mortgage will make up for the cost of the appraisal in a matter of months. Nobody is more qualified than Tim Norris & Associates when it comes to appreciating values in the city of Fort Wayne and Allen County. Contact us today.
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How can a home owner prevent paying PMI?
The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount.
Keen homeowners can get off the hook beforehand. The law designates that, at the request of the home owner, the PMI must be dropped when the principal amount reaches only 80 percent.
It can take a significant number of years to reach the point where the principal is just 80% of the original loan amount, so it's important to know how your Indiana home has grown in value.
After all, any appreciation you've accomplished over time counts towards dismissing 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 conform to national trends and/or your home might have secured equity before things declined. So even when nationwide trends signify declining home values, you should know most importantly that real estate is local.
A certified, Indiana licensed real estate appraiser can help home owners figure out just when their home's equity rises above the 20% point, as it's a difficult thing to know.
As appraisers, it's our job to know the market dynamics of our area.
At Tim Norris & Associates, we know when property values have risen or declined. We're masters at pinpointing value trends in Fort Wayne, Allen County, and surrounding areas.
When faced with data from an appraiser, the mortgage company will usually cancel the PMI with little anxiety. At which time, the home owner can relish the savings from that point on.
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Has your home value appreciated since you first purchased? Contact Tim Norris & Associates today at 260 471-1061. You may be able to get rid of your Private Mortgage Insurance payment.
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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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