Let Blanton Appraisal Services help you discover if you can cancel your PMI
A 20% down payment is usually accepted when buying a house. The lender's liability is generally only the difference between the home value and the amount outstanding on the loan, so the 20% supplies a nice buffer against the expenses of foreclosure, selling the home again, and typical value variations on the chance that a purchaser doesn't pay.
Lenders were taking down payments down to 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. How does a lender handle the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplementary policy protects the lender in case a borrower is unable to pay on the loan and the worth of the property is less than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and generally isn't even tax deductible, PMI is pricey to a borrower. Different from a piggyback loan where the lender consumes all the deficits, PMI is advantageous 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 can buyers keep from paying PMI?
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Smart home owners can get off the hook a little earlier. The law pledges that, upon request of the home owner, the PMI must be released when the principal amount reaches just 80 percent.
Since it can take many years to reach the point where the principal is just 20% of the initial loan amount, it's important to know how your home has increased in value. After all, all of the appreciation you've accomplished over time counts towards removing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Despite the fact that nationwide trends indicate declining home values, be aware that real estate is local. Your neighborhood may not be heeding the national trends and/or your home could have acquired equity before things settled down.
The toughest thing for many homeowners to understand is just when their home's equity goes over 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 Blanton Appraisal Services, we know when property values have risen or declined. We're masters at analyzing value trends in Tangerine, Orange County and surrounding areas. When faced with data from an appraiser, the mortgage company will generally eliminate 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: