Let Amerappraise, LLC help you discover if you can cancel your PMI
A 20% down payment is usually the standard when purchasing a home. Since the liability for the lender is oftentimes only the difference between the home value and the amount outstanding on the loan, the 20% provides a nice cushion against the charges of foreclosure, reselling the home, and regular value changeson the chance that a borrower defaults.
Banks were working with down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the increased risk of the small down payment with Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower defaults on the loan and the worth of the property is less than the balance of the loan.
PMI is costly to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and frequently isn't even tax deductible. Opposite from a piggyback loan where the lender consumes all the losses, PMI is beneficial for the lender because they secure the money, and they receive payment if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homebuyers prevent bearing the cost of PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law guarantees that, at the request of the home owner, the PMI must be dropped when the principal amount equals just 80 percent. So, smart home owners can get off the hook a little earlier.
Since it can take countless years to reach the point where the principal is only 20% of the original amount of the loan, it's essential to know how your home has grown in value. After all, any appreciation you've gained over time counts towards dismissing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Your neighborhood might not be adopting the national trends and/or your home may have acquired equity before things cooled off, so even when nationwide trends indicate falling home values, you should understand that real estate is local.
The hardest thing for almost all homeowners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can definitely help. It's an appraiser's job to recognize the market dynamics of their area. At Amerappraise, LLC, we know when property values have risen or declined. We're masters at analyzing value trends in Bear, New Castle County and surrounding areas. Faced with information from an appraiser, the mortgage company will most often cancel the PMI with little effort. At which time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: