Let Belles Appraisal Service, LLC help you decide if you can eliminate your PMI
A 20% down payment is usually accepted when purchasing a home. The lender's risk is generally only the remainder between the home value and the amount remaining on the loan, so the 20% supplies a nice buffer against the expenses of foreclosure, selling the home again, and regular value variations on the chance that a borrower doesn't pay.
Lenders were taking down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender handle the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This supplemental policy covers the lender in the event a borrower doesn't pay on the loan and the market price of the property is lower than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and generally isn't even tax deductible, PMI is pricey to a borrower. Unlike a piggyback loan where the lender consumes all the costs, PMI is beneficial for the lender because they acquire the money, and they get the money 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 can a buyer refrain from bearing the cost of PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Savvy home owners can get off the hook a little earlier. The law promises that, upon request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent.
It can take countless years to reach the point where the principal is just 20% of the original amount of the loan, so it's crucial to know how your home has grown in value. After all, any appreciation you've acquired over the years counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends hint at plummeting home values, be aware that real estate is local. Your neighborhood might not be adopting the national trends and/or your home may have gained equity before things calmed down.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At Belles Appraisal Service, LLC, we know when property values have risen or declined. We're masters at determining value trends in Brush, Morgan County and surrounding areas. When faced with data from an appraiser, the mortgage company will generally 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: