Let A. M. Appraisals help you figure out if you can cancel your PMI
A 20% down payment is usually the standard when purchasing a home. Considering the risk for the lender is often only the difference between the home value and the amount remaining on the loan, the 20% adds a nice cushion against the charges of foreclosure, selling the home again, and natural value variationsin the event a purchaser is unable to pay.
During the recent mortgage upturn of the last decade, it became common to see lenders requiring down payments of 10, 5 or even 0 percent. How does a lender endure the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower doesn't pay on the loan and the market price of the property is less than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and frequently isn't even tax deductible, PMI can be pricey to a borrower. Opposite from a piggyback loan where the lender takes in all the damages, PMI is favorable for the lender because they collect the money, and they receive payment 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 can buyers prevent paying PMI?
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Smart home owners can get off the hook a little earlier. The law guarantees that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent.
Because it can take many years to arrive at the point where the principal is just 20% of the original amount of the loan, it's crucial to know how your home has appreciated in value. After all, any appreciation you've accomplished over time counts towards abolishing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not be adopting the national trends and/or your home might have secured equity before things calmed down, so even when nationwide trends hint at declining home values, you should realize that real estate is local.
The toughest thing for almost all homeowners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can certainly help. It is an appraiser's job to understand the market dynamics of their area. At A. M. Appraisals, we know when property values have risen or declined. We're masters at recognizing value trends in West Columbia, Lexington County and surrounding areas. When faced with information from an appraiser, the mortgage company will most often eliminate the PMI with little effort. At that time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link:
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