Let Allen Appraisal Service help you figure out if you can cancel your PMI
It's largely known that a 20% down payment is accepted when purchasing a home. Since 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 buffer against the charges of foreclosure, selling the home again, and natural value changesin the event a purchaser defaults.
Lenders were working with down payments down to 10, 5 and even 0 percent during the mortgage boom of the last decade. How does a lender manage the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This additional policy protects the lender in the event a borrower defaults on the loan and the value of the property is less than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and often isn't even tax deductible, PMI is costly to a borrower. Separate from a piggyback loan where the lender absorbs all the damages, PMI is money-making for the lender because they collect the money, and they get paid if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How buyers can keep from bearing the expense of PMI
With the employment 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 original loan amount. The law designates that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent. So, smart homeowners can get off the hook sooner than expected.
Since it can take countless years to arrive at the point where the principal is just 20% of the original amount of the loan, it's important to know how your home has appreciated in value. After all, all of the appreciation you've accomplished over time counts towards dismissing PMI. So why pay it after your loan balance has fallen below the 80% mark? Despite the fact that nationwide trends signify declining home values, be aware that real estate is local. Your neighborhood may not be heeding the national trends and/or your home may have secured equity before things settled down.
The difficult thing for most home owners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can definitely help. It is an appraiser's job to keep up with the market dynamics of their area. At Allen Appraisal Service, we know when property values have risen or declined. We're experts at determining value trends in Washington, Washington County and surrounding areas. Faced with information from an appraiser, the mortgage company will most often cancel the PMI with little anxiety. At which time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link:
Would you like to save money by not having to pay for Private Mortgage Insurance? We can help. Simply fill out the form below as completely as possible and we'll send you information on how to save PMI expenses, with no obligation to you. We guarantee your privacy.