Let PMJ Appraisals, LLC help you learn if you can cancel your PMI
When purchasing a home, a 20% down payment is typically the standard. The lender's liability is oftentimes only the remainder between the home value and the sum outstanding on the loan, so the 20% adds a nice cushion against the costs of foreclosure, reselling the home, and natural value variations in the event a borrower doesn't pay.
Lenders were accepting down payments down to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. How does a lender manage the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI protects the lender in the event a borrower doesn't pay on the loan and the worth of the home is lower than what is owed on the loan.
PMI can be costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and generally isn't even tax deductible. Separate from a piggyback loan where the lender consumes all the damages, PMI is lucrative for the lender because they acquire the money, and they get paid 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 buyers can keep from paying PMI
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law pledges that, at the request of the home owner, the PMI must be dropped when the principal amount reaches only 80 percent. So, keen home owners can get off the hook a little earlier.
It can take countless years to arrive at the point where the principal is just 20% of the original amount of the loan, so it's essential to know how your home has increased in value. After all, any appreciation you've accomplished over time counts towards removing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Your neighborhood might not be adopting the national trends and/or your home could have gained equity before things calmed down, so even when nationwide trends hint at falling home values, you should understand that real estate is local.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At PMJ Appraisals, LLC , we know when property values have risen or declined. We're masters at recognizing value trends in Oreland, Montgomery County and surrounding areas. When faced with information from an appraiser, the mortgage company will most often cancel 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: