Let Graham Appraisal help you figure out if you can cancel your PMI
When purchasing a home, a 20% down payment is usually the standard. The lender's liability is usually only the difference between the home value and the amount remaining on the loan, so the 20% adds a nice cushion against the charges of foreclosure, selling the home again, and regular value fluctuations in the event a borrower doesn't pay.
During the recent mortgage boom of the last decade, it became widespread to see lenders taking down payments of 10, 5 or sometimes 0 percent. How does a lender handle the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI guards the lender if a borrower doesn't pay on the loan and the worth of the home is lower than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and often isn't even tax deductible, PMI can be expensive to a borrower. Different from a piggyback loan where the lender takes in all the costs, PMI is money-making for the lender because they obtain the money, and they get the money 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 homebuyers keep from paying PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law states that, at the request of the home owner, the PMI must be released when the principal amount equals just 80 percent. So, acute home owners can get off the hook sooner than expected.
Because it can take many years to reach the point where the principal is only 20% of the original amount borrowed, it's crucial to know how your home has grown in value. After all, any appreciation you've acquired over time counts towards abolishing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Despite the fact that nationwide trends hint at decreasing home values, realize that real estate is local. Your neighborhood may not be adopting the national trends and/or your home could have acquired equity before things simmered down.
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 Graham Appraisal, we're masters at identifying value trends in Glasgow, Barren County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will often cancel 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: