Let Appraisal Professionals help you determine if you can cancel your PMI
When getting a mortgage, a 20% down payment is typically the standard. The lender's liability is often only the remainder between the home value and the sum remaining on the loan, so the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and regular value variations in the event a purchaser defaults.
During the recent mortgage boom of the last decade, it became common to see lenders requiring down payments of 10, 5 or sometimes 0 percent. A lender is able to endure the added risk of the low down payment with Private Mortgage Insurance or PMI. PMI covers the lender if a borrower is unable to pay on the loan and the worth of the house is less than what the borrower still owes on the loan.
PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and frequently isn't even tax deductible. Unlike a piggyback loan where the lender consumes all the deficits, PMI is advantageous for the lender because they collect the money, and they get the money if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homebuyers can avoid bearing the cost of PMI
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Smart homeowners can get off the hook a little early. The law promises that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent.
It can take many years to arrive at the point where the principal is just 20% of the original loan amount, so it's important to know how your home has increased in value. After all, any appreciation you've achieved over time counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% mark? Your neighborhood may not be following the national trends and/or your home may have acquired equity before things calmed down, so even when nationwide trends forecast falling home values, you should realize that real estate is local.
The difficult thing for almost all home owners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can definitely help. It's an appraiser's job to recognize the market dynamics of their area. At Appraisal Professionals, we're experts at determining value trends in Kyle, Hays County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will usually do away with the PMI with little effort. 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: