Appraisal Questions
How may I request an Appraisal?
We have 4 different ways so that we may better serve your needs.
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How is equity figured?
Equity is the difference between the value of your home and the mortgage
balance. For example, your home is worth $100,000 and your mortgage balance is $80,000,
then your equity is $20,000).
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What is Private Mortgage Insurance (PMI)?
Mortgage Insurance is a type of insurance charged by most lenders to offset the risk of
your loan when your down payment is less than 20% of the value of the home. The premium for
this insurance varies by loan amount which may be an extra $40.00 to $60.00 per month.
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The Purpose of PMI
Statistically, the more a purchaser's own money is involved in a real estate
transaction, the less likely s/he is to default on the mortgage. Lenders have
long adhered to a 20% equity requirement for mortgagors (the buyer). Private
Mortgage Insurance (aka PMI) was devised over 30 years ago to allow families
to buy their homes with less than 20% down payment. Companies called Private Mortgage
Insurers take money collected from you (through the mortgage servicer as part
of your mortgage payment) to insure the lender against potential loss should you
default on the loan. However, once a home purchaser has achieved 20% equity in their home,
where is the extra risk? In other words, the lender will NEVER collect on the insurance
policy! SO, WHY SHOULD THIS EXPENSE TO YOU BE CONTINUED?
The Liability
PMI becomes a serious financial liability to homeowners if they do not take
the initiative to discontinue it. However, as an un-itemized component of
mortgage payments, most people are not aware they are paying for it, let alone
that it can be eliminated. Thousands of homeowners have needlessly paid many
thousands of dollars over the entire term of their mortgage. No one, but you
the homeowner, has any vested interest in an unnecessary policy being dropped.
In fact, the opposite is true. Someone does benefit from hundreds of millions
of dollars in unearned premiums collected each year, and the interest on the
hundreds of millions of dollars sitting in escrow accounts each year. We
estimate the present value of these resources to be well over one billion
dollars ($1,000,000,000).
The Obligations
Currently, lenders are under no obligation to inform you that you have the right to end
this expense once you have reached the 20% equity level; and numerous class action law
suits across the country have stalled in the lower courts. However, while the much
anticipated, and now recently passed (i.e. July 1998), PMI-related amendment to the
Truth in Lending Act is an overall disappointment, it does contain provisions for
mandatory notification to borrowers that it is possible to discontinue PMI. (Listen
to some clips available on our Third Party Information Page.) Also, it appears that
in the future it will end the majority of the most outrageous cases of abuse--the gouging
of homeowners over the entire term of the mortgage. Unfortunately, this legislation
will only apply to policies issued 12 months after the new law takes affect (i.e. July 1999).
Even then, any automatic cancellation provisions will be based on the original purchase
price, which totally disregards equity appreciation through real property value growth.
Regardless, you as a current homeowner will still be subject to the "old way!"
The lenders' argument is they can not be assured that a property has not diminished
in value. Therefore, they believe they have nothing to lose by allowing you to continue
to pay. Some economists might depict the continuation of payments as a simple
redistribution of wealth, assuming that these funds are recycled back into the
system (don't count on it). This theoretically lowers insurance rates for new home
purchasers who may have greater need.
PMI Rescue suggests that existing homeowners should not be forced to continue
contributing to this "redistribution of wealth."
The Premiums
The dollar amount of monthly premiums for PMI depends on your initial loan-to-value
ratio, loan term, and the amount borrowed (it has nothing to do with your income or
credit rating). A typical premium on a thirty-year loan will range from about 1/2%
to 1% of the initial amount borrowed Per Year!
While there are numerous ways for it to be set up, most mortgages with PMI have
required the homeowner to pay a full year of premiums in advance at loan closing
(whether they realize it or not). In addition, an escrow account continues to
accumulate 1/12 of the following year's premiums each month thereafter as a
portion of monthly mortgage payments. For this reason, many thousands of homeowners
are due a significant refund of at least one year's worth of premiums, in addition
to permanent discontinuation of payments. Refunds are based on already paid, but
unearned, PMI premiums existing at the time of cancellation. Mortgages originating
since about 1995 are more likely to have required only a two month rather than a
full 12 or 14 month prepayment. Homeowners can determine the exact amount of refund
they are due by closely examining Line #902 and #1002 of the HUD settlement statement
they received at loan closing. The amounts shown on these two lines will mirror the
total refund they are due
Credit to pmirescue.com.
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How Do I Drop Private Mortgage Insurance?
To be eligible to drop PMI, you must have at least 20% equity in your home. Equity
is built up through a combination of four primary influences:
- Regional or local property value appreciation
- Value enhancing home improvements
- Mortgage balance paydown
- Inflation
The first step is to calculate the minimum value your property must have in order to
demonstrate the required 20% equity level. Typically, determining this ever-changing
minimum value, known as your PMI Threshold Value, has been a complex (and unknown)
process. However, now you can just go to the on-line PMI Calculator and calculate
your PMI Threshold Value--Compliments of PMI Rescue!
The other crucial considerations for successful elimination are:
- Estimating your property's current Market Value to compare with your loan's current
PMI Threshold Value. We are experienced Real Estate Appraisers and we
show you how to do this.
- Preparing an effective PMI elimination strategy. The strategies we provide are
designed to avoid the pitfalls inherent in the cancellation process. Remember, ending
PMI requires the convincing of a lending institution or mortgage servicing company
to do something they have no vested interest in doing. Typically, mortgage servicers
and lenders are less than "fountains of inspired enlightenment" on the subject. The
proven strategies we provide Work.
- Avoiding the "Brush Off." Mortgage servicers and lenders normally fall somewhat
short of "highly motivated" when it comes to responsiveness and assistance. We
have seen this time and time again, as home owners are told erroneous information
in an attempt to discourage further pursuance of PMI elimination. We show you how
to get them to be cooperative.
Credit to pmirescue.com.
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What are Appraisals used for?
An appraisal is an independent, unbiased estimate of value that often serves as a
cornerstone in a transaction. Professional appraisers value property with
independence and objectivity. Appraisals are used for many purposes such as;
- Mortgage lending
- Donations and Insurance
- Investments
- Property Taxes
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How does an Appraiser estimate value?
Appraisers are taught to estimate value by following three recognized approaches to value.
Sales Comparison Approach
Compares similar, recently sold properties (homes, farms, machinery, jewelry) to the property.
Income Approach
Estimates what a prudent investor would pay for the property base on the income
the property produces.
Cost Approach
Estimates the cost to replace or reproduce the property being appraised.
Through consideration of results of the analysis conducted, an appraiser then
develops a final estimate or opinion of value.
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State Certified and FHA Approved
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Kungel Appraisals LLC
Office Info:
PO Box 100
Cedar, Minnesota, 55011
Contact Info:
Lisa: 763.425.9696 / Jena: 763.607.2226
Fax: 763.792.0805
Email: info@KungelAppraisals.com
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www.KungelAppraisals.com www.KungelAppraisals.biz
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