Let Taylor and Associates Appraisal Services, LLC. help you decide if you can cancel your PMI
A 20% down payment is usually accepted when purchasing a home. Because the risk for the lender is often only the remainder between the home value and the amount due on the loan, the 20% provides a nice buffer against the charges of foreclosure, selling the home again, and typical value changeson the chance that a borrower doesn't pay.
During the recent mortgage boom of the mid 2000s, it became widespread to see lenders taking down payments of 10, 5 or often 0 percent. How does a lender handle the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower is unable to pay on the loan and the worth of the home is less than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and frequently isn't even tax deductible, PMI can be expensive to a borrower. Unlike a piggyback loan where the lender takes in all the deficits, PMI is lucrative for the lender because they obtain 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 avoid bearing the expense of PMI
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law pledges that, at the request of the home owner, the PMI must be released when the principal amount equals only 80 percent. So, acute homeowners can get off the hook a little earlier.
It can take many years to reach the point where the principal is only 20% of the original amount borrowed, so it's crucial to know how your home has increased in value. After all, all of the appreciation you've achieved over time counts towards abolishing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Despite the fact that nationwide trends signify decreasing home values, be aware that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home might have acquired equity before things settled down.
The toughest thing for almost all home owners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can surely help. As appraisers, it's our job to know the market dynamics of our area. At Taylor and Associates Appraisal Services, LLC., we know when property values have risen or declined. We're experts at recognizing value trends in Lakeland, Polk County and surrounding areas. When faced with data from an appraiser, the mortgage company will generally drop the PMI with little trouble. At which time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: