Let Amerappraise, LLC help you discover if you can eliminate your PMI
It's generally understood that a 20% down payment is the standard when purchasing a home. The lender's risk is generally only the difference between the home value and the amount due on the loan, so the 20% adds a nice cushion against the charges of foreclosure, reselling the home, and natural value fluctuations in the event a borrower doesn't pay.
The market was working with down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI covers the lender if a borrower doesn't pay on the loan and the value of the property is lower than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and frequently isn't even tax deductible, PMI can be expensive to a borrower. It's favorable for the lender because they secure the money, and they get paid if the borrower is unable to pay, opposite from a piggyback loan where the lender consumes all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home owner refrain from bearing the expense of PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Savvy homeowners can get off the hook a little earlier. The law states that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent.
It can take many years to get to the point where the principal is only 20% of the initial amount borrowed, so it's necessary to know how your home has increased in value. After all, every bit of appreciation you've accomplished over time counts towards removing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends hint at declining home values, be aware that real estate is local. Your neighborhood may not be minding the national trends and/or your home might have acquired equity before things simmered down.
The hardest thing for almost all homeowners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can definitely help. As appraisers, it's our job to know the market dynamics of our area. At Amerappraise, LLC, we know when property values have risen or declined. We're experts at determining value trends in Bear, New Castle County and surrounding areas. Faced with figures from an appraiser, the mortgage company will usually cancel the PMI with little trouble. 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: