Let Barnes Appraisal Company help you discover if you can cancel your PMI
A 20% down payment is typically the standard when buying a house. The lender's risk is often only the remainder between the home value and the amount outstanding on the loan, so the 20% adds a nice buffer against the charges of foreclosure, reselling the home, and natural value fluctuations on the chance that a purchaser doesn't pay.
During the recent mortgage upturn of the last decade, it was common to see lenders requiring down payments of 10, 5 or even 0 percent. A lender is able to endure the additional risk of the low down payment with Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower doesn't pay on the loan and the market price of the home is lower than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and generally isn't even tax deductible, PMI is pricey to a borrower. Separate from a piggyback loan where the lender absorbs all the deficits, PMI is money-making for the lender because they acquire the money, and they receive payment 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 can home owners avoid bearing the cost of PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law designates that, upon request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent. So, savvy homeowners can get off the hook a little early.
It can take countless years to arrive at the point where the principal is only 20% of the original amount of the loan, so it's essential to know how your home has grown in value. After all, any appreciation you've acquired over time counts towards abolishing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Your neighborhood may not be adopting the national trends and/or your home may have acquired equity before things simmered down, so even when nationwide trends signify falling home values, you should realize that real estate is local.
The difficult thing for almost all homeowners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can certainly help. As appraisers, it's our job to know the market dynamics of our area. At Barnes Appraisal Company, we're experts at determining value trends in Lawton, Comanche 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 remove the PMI with little anxiety. At which time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: