Let Astute Appraisals, Inc. help you discover if you can get rid of your PMI
It's largely inferred that a 20% down payment is common when purchasing a home. Since the liability for the lender is oftentimes only the remainder between the home value and the sum outstanding on the loan, the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and natural value variationsin the event a borrower is unable to pay.
During the recent mortgage boom of the mid 2000s, it was widespread to see lenders commanding down payments of 10, 5 or often 0 percent. A lender is able to manage the increased risk of the small down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower is unable to pay on the loan and the worth of the home is less than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and frequently isn't even tax deductible, PMI can be expensive to a borrower. It's profitable for the lender because they acquire the money, and they receive payment if the borrower is unable to pay, contradictory to a piggyback loan where the lender takes in all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homeowners refrain from paying PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Acute homeowners can get off the hook a little earlier. The law promises that, upon request of the home owner, the PMI must be released when the principal amount reaches only 80 percent.
It can take many years to arrive at the point where the principal is only 20% of the initial amount of the loan, so it's essential to know how your home has increased in value. After all, all of the appreciation you've obtained over the years counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Despite the fact that nationwide trends signify declining home values, realize that real estate is local. Your neighborhood might not be minding the national trends and/or your home could have acquired equity before things settled down.
The difficult thing for most homeowners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can surely help. As appraisers, it's our job to keep up with the market dynamics of our area. At Astute Appraisals, Inc., we're experts at determining value trends in Columbia, Howard County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will usually cancel the PMI with little effort. At that 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: