Let Mitchell Appraisals help you learn if you can cancel your PMI
A 20% down payment is typically the standard when buying a house. Considering the liability for the lender is generally only the remainder between the home value and the sum remaining on the loan, the 20% provides a nice buffer against the charges of foreclosure, selling the home again, and regular value fluctuationsin the event a borrower defaults.
Banks were working with down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the added risk of the minimal down payment with Private Mortgage Insurance or PMI. This additional policy takes care of the lender in the event a borrower defaults on the loan and the value of the property is lower than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and many times isn't even tax deductible, PMI can be pricey to a borrower. Unlike a piggyback loan where the lender takes in all the damages, PMI is favorable for the lender because they acquire the money, and they get the money 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 can a homeowner prevent bearing the expense of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Acute home owners can get off the hook a little earlier. The law pledges that, at the request of the home owner, the PMI must be released when the principal amount reaches just 80 percent.
Since it can take many years to reach the point where the principal is just 20% of the initial amount of the loan, it's essential to know how your home has grown in value. After all, any appreciation you've gained over time counts towards abolishing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Even when nationwide trends signify plummeting home values, realize that real estate is local. Your neighborhood might not be adopting the national trends and/or your home may have secured equity before things calmed down.
The toughest thing for most homeowners to know 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 Mitchell Appraisals, we're masters at determining value trends in Navarre, Santa Rosa County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will most often drop the PMI with little trouble. At which 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: