Let Savery Appraisal Services, Inc. help you determine if you can cancel your PMI
A 20% down payment is usually accepted when getting a mortgage. Considering the risk for the lender is generally only the difference between the home value and the sum remaining on the loan, the 20% supplies a nice cushion against the costs of foreclosure, selling the home again, and typical value fluctuationson the chance that a borrower is unable to pay.
The market was taking down payments as low as 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. A lender is able to endure the increased risk of the low down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower defaults on the loan and the market price of the house is lower than the balance of the loan.
PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and generally isn't even tax deductible. It's lucrative for the lender because they collect the money, and they get the money if the borrower doesn't pay, opposite from a piggyback loan where the lender takes in all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a buyer avoid bearing the cost of PMI?
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Wise home owners can get off the hook a little earlier. The law states that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent.
It can take many years to arrive at the point where the principal is just 20% of the initial amount borrowed, so it's essential to know how your home has grown in value. After all, every bit of appreciation you've gained over the years counts towards abolishing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not be heeding the national trends and/or your home could have acquired equity before things settled down, so even when nationwide trends forecast decreasing home values, you should understand that real estate is local.
The hardest 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 certainly help. It is an appraiser's job to keep up with the market dynamics of their area. At Savery Appraisal Services, Inc., we know when property values have risen or declined. We're masters at identifying value trends in Lindsay, Tulare County and surrounding areas. When faced with data from an appraiser, the mortgage company will generally remove the PMI with little effort. At that time, the homeowner can enjoy 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.