Let Furr Appraisal Service help you decide if you can cancel your PMI
When buying a house, a 20% down payment is usually the standard. Considering the risk for the lender is often only the remainder between the home value and the sum due on the loan, the 20% provides a nice buffer against the costs of foreclosure, reselling the home, and typical value changeson the chance that a purchaser defaults.
During the recent mortgage upturn of the last decade, it was widespread to see lenders commanding down payments of 10, 5 or often 0 percent. A lender is able to endure the additional risk of the minimal 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 worth of the house is lower than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly 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 costs, PMI is favorable for the lender because they obtain the money, and they receive payment 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 refrain from bearing the expense of PMI?
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law promises that, upon request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent. So, wise homeowners can get off the hook a little earlier.
It can take countless years to reach the point where the principal is only 20% of the original amount borrowed, so it's crucial to know how your home has appreciated in value. After all, all of the appreciation you've gained over time counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has dropped 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 predict plummeting home values, you should realize that real estate is local.
The difficult thing for many home owners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can definitely help. It's an appraiser's job to know the market dynamics of their area. At Furr Appraisal Service, we're masters at identifying value trends in Camden, Benton County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will generally do away with the PMI with little effort. At that time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: