Let Amerappraise, LLC help you learn if you can cancel your PMI
It's typically inferred that a 20% down payment is common when buying a house. The lender's risk is oftentimes only the remainder between the home value and the sum due on the loan, so the 20% supplies a nice buffer against the expenses of foreclosure, reselling the home, and natural value changes in the event a purchaser defaults.
Banks were accepting down payments down to 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender manage the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This additional plan guards the lender if a borrower is unable to pay on the loan and the market price of the house is less than what the borrower still owes on the loan.
PMI can be costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and frequently isn't even tax deductible. It's money-making for the lender because they acquire the money, and they receive payment if the borrower is unable to pay, unlike a piggyback loan where the lender consumes all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home owners keep from paying PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law designates that, at the request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent. So, savvy homeowners can get off the hook a little earlier.
Since it can take many years to arrive at the point where the principal is just 20% of the original loan amount, it's crucial to know how your home has appreciated in value. After all, every bit of appreciation you've achieved over the years counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Your neighborhood might not be minding the national trends and/or your home might have secured equity before things cooled off, so even when nationwide trends predict plummeting home values, you should understand that real estate is local.
The difficult thing for many home owners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. It's an appraiser's job to know the market dynamics of their area. At Amerappraise, LLC, we're masters at recognizing value trends in Bear, New Castle County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will often cancel the PMI with little anxiety. At which time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: