Let Corrie Appraisal & Consulting, Inc. help you determine if you can get rid of your PMI
A 20% down payment is typically the standard when purchasing a home. The lender's liability is generally only the difference between the home value and the amount remaining on the loan, so the 20% adds a nice buffer against the costs of foreclosure, reselling the home, and natural value changes on the chance that a borrower doesn't pay.
During the recent mortgage boom of the last decade, it became customary to see lenders requiring down payments of 10, 5 or often 0 percent. A lender is able to endure the added risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI protects the lender if a borrower doesn't pay on the loan and the worth of the property is less than the loan balance.
PMI can be expensive to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and oftentimes isn't even tax deductible. Separate from a piggyback loan where the lender takes in all the deficits, PMI is profitable for the lender because they acquire the money, and they receive payment if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home owners can refrain from bearing the cost of PMI
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law states that, upon request of the home owner, the PMI must be released when the principal amount reaches only 80 percent. So, smart home owners can get off the hook a little early.
Considering it can take many years to arrive at the point where the principal is only 20% of the original amount borrowed, it's essential to know how your home has increased in value. After all, all of the appreciation you've accomplished over the years counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% threshold? Your neighborhood might not be following the national trends and/or your home could have gained equity before things simmered down, so even when nationwide trends signify falling home values, you should understand that real estate is local.
The toughest thing for almost all homeowners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can certainly help. As appraisers, it's our job to recognize the market dynamics of our area. At Corrie Appraisal & Consulting, Inc., we're experts at identifying value trends in Charleston, Coles County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will often cancel the PMI with little trouble. 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: