Let Performance Appraisals Inc. help you learn if you can cancel your PMI
When purchasing a home, a 20% down payment is usually the standard. The lender's liability is often only the difference between the home value and the sum due on the loan, so the 20% adds a nice buffer against the costs of foreclosure, selling the home again, and natural value variations on the chance that a purchaser is unable to pay.
The market was taking down payments down to 10, 5 and even 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. This supplementary policy covers the lender in the event a borrower is unable to pay on the loan and the value of the home is less than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and oftentimes isn't even tax deductible, PMI is pricey to a borrower. It's lucrative 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 deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homebuyer avoid bearing the cost of PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically cease the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Acute homeowners can get off the hook a little earlier. The law designates that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent.
It can take many years to arrive at the point where the principal is just 20% of the original loan amount, so it's important to know how your home has increased in value. After all, any appreciation you've gained over the years counts towards removing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not be adhering to the national trends and/or your home could have acquired equity before things calmed down, so even when nationwide trends signify 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 rises above the 20% point, as it's a difficult thing to know. As appraisers, it's our job to know the market dynamics of our area. At Performance Appraisals Inc., we know when property values have risen or declined. We're masters at determining value trends in Ponte Vedra Beach, Saint Johns County and surrounding areas. Faced with information from an appraiser, the mortgage company will usually do away with the PMI with little anxiety. At that time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: