Let A. M. Appraisals help you decide if you can cancel your PMI
A 20% down payment is typically the standard when getting a mortgage. Considering the liability for the lender is usually only the difference between the home value and the sum due on the loan, the 20% supplies a nice buffer against the charges of foreclosure, selling the home again, and regular value variationsin the event a purchaser is unable to pay.
The market was accepting down payments as low as 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender endure the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplemental plan covers the lender in case a borrower doesn't pay on the loan and the market price of the house is less than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and generally isn't even tax deductible, PMI is costly to a borrower. Different from a piggyback loan where the lender absorbs all the losses, PMI is beneficial for the lender because they obtain 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 can buyers keep from bearing the cost of PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Wise home owners can get off the hook ahead of time. The law guarantees that, upon request of the home owner, the PMI must be released when the principal amount reaches just 80 percent.
It can take countless years to arrive at the point where the principal is just 20% of the initial loan amount, so it's important to know how your home has grown in value. After all, every bit of appreciation you've obtained over time counts towards removing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood may not be minding the national trends and/or your home may have gained equity before things simmered down, so even when nationwide trends forecast falling home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. It's an appraiser's job to understand the market dynamics of their area. At A. M. Appraisals, we're experts at identifying value trends in West Columbia, Lexington County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will generally cancel 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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