Let Performance Appraisals Inc. help you determine if you can cancel your PMI
When buying a house, a 20% down payment is typically the standard. The lender's liability is usually only the remainder between the home value and the amount outstanding on the loan, so the 20% supplies a nice buffer against the costs of foreclosure, reselling the home, and natural value variations on the chance that a borrower doesn't pay.
Lenders were accepting down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender handle the increased 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 worth of the house is less than what the borrower still owes on the loan.
PMI can be pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and generally isn't even tax deductible. Different from a piggyback loan where the lender absorbs all the losses, PMI is lucrative for the lender because they collect the money, and they get paid 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 home buyers can keep from paying PMI
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law promises that, upon request of the home owner, the PMI must be dropped when the principal amount reaches only 80 percent. So, acute homeowners can get off the hook a little early.
It can take many years to reach the point where the principal is just 20% of the initial loan amount, so it's necessary to know how your home has increased in value. After all, any appreciation you've accomplished over the years counts towards removing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold? Your neighborhood may not be adhering to the national trends and/or your home might have gained equity before things settled down, so even when nationwide trends signify plunging home values, you should realize that real estate is local.
The toughest thing for almost all home owners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can surely help. As appraisers, it's our job to keep up with the market dynamics of our area. At Performance Appraisals Inc., we know when property values have risen or declined. We're masters at recognizing value trends in Ponte Vedra Beach, Saint Johns County and surrounding areas. Faced with information from an appraiser, the mortgage company will most often do away with the PMI with little effort. At which 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: