Let Race Appraisal Services, LLC help you figure out if you can cancel your PMI
It's widely known that a 20% down payment is common when purchasing a home. Because the risk for the lender is often only the difference between the home value and the sum due on the loan, the 20% adds a nice cushion against the expenses of foreclosure, selling the home again, and natural value changesin the event a purchaser is unable to pay.
During the recent mortgage boom of the last decade, it was customary to see lenders requiring down payments of 10, 5 or sometimes 0 percent. How does a lender manage the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower defaults on the loan and the value of the house is lower than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible, PMI can be costly to a borrower. It's favorable for the lender because they obtain the money, and they receive payment if the borrower defaults, opposite from a piggyback loan where the lender consumes all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home buyer prevent bearing the cost 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 equals 78 percent of the original loan amount. Acute homeowners can get off the hook beforehand. The law stipulates that, upon request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent.
Since it can take countless years to get to the point where the principal is only 20% of the original amount of the loan, it's important to know how your home has increased in value. After all, every bit of appreciation you've obtained over the years counts towards removing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends indicate declining home values, understand that real estate is local. Your neighborhood might not be minding the national trends and/or your home could have secured equity before things cooled off.
The hardest thing for most homeowners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can certainly help. As appraisers, it's our job to know the market dynamics of our area. At Race Appraisal Services, LLC, we're masters at identifying value trends in East Longmeadow, Hampden County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will generally eliminate the PMI with little trouble. At which time, the homeowner can relish 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.