Let Appraisal Professionals, LLC help you discover if you can cancel your PMI
It's generally inferred that a 20% down payment is accepted when buying a house. The lender's liability is generally only the difference between the home value and the sum remaining on the loan, so the 20% provides a nice cushion against the charges of foreclosure, reselling the home, and regular value variations on the chance that a borrower is unable to pay.
During the recent mortgage boom of the mid 2000s, it became common to see lenders taking down payments of 10, 5 or often 0 percent. A lender is able to handle the increased risk of the low down payment with Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower doesn't pay on the loan and the value of the home is lower than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and frequently isn't even tax deductible, PMI is costly to a borrower. Contradictory to a piggyback loan where the lender consumes all the costs, PMI is profitable for the lender because they collect the money, and they get the money if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home owners can avoid bearing the expense of PMI
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law stipulates that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent. So, acute homeowners can get off the hook a little early.
Considering it can take countless years to get to the point where the principal is just 20% of the original amount borrowed, it's necessary to know how your home has appreciated in value. After all, all of the appreciation you've accomplished over the years counts towards dismissing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Your neighborhood may not be heeding the national trends and/or your home might have secured equity before things cooled off, so even when nationwide trends indicate decreasing home values, you should understand that real estate is local.
The hardest thing for most homeowners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can surely help. It is an appraiser's job to keep up with the market dynamics of their area. At Appraisal Professionals, LLC, we're masters at pinpointing value trends in Kyle, Hays County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will most often remove the PMI with little anxiety. 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: