Let Giles Appraisal Group, Inc. help you decide if you can cancel your PMI
It's generally inferred that a 20% down payment is accepted when buying a house. Because the liability for the lender is usually only the remainder between the home value and the amount due on the loan, the 20% provides a nice cushion against the charges of foreclosure, selling the home again, and typical value changeson the chance that a borrower is unable to pay.
The market was taking down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender manage the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This supplemental policy protects the lender in case a borrower is unable to pay on the loan and the market price of the property 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 many times isn't even tax deductible, PMI is costly to a borrower. It's money-making for the lender because they acquire the money, and they get the money if the borrower doesn't pay, different from a piggyback loan where the lender absorbs all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homeowners can keep from bearing the cost of PMI
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Smart homeowners can get off the hook beforehand. The law states that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent.
It can take countless years to arrive at the point where the principal is just 20% of the original loan amount, so it's crucial to know how your home has grown in value. After all, all of the appreciation you've obtained over time counts towards dismissing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Despite the fact that nationwide trends forecast falling home values, be aware that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home might have gained equity before things simmered down.
The difficult thing for many home owners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can definitely help. It is an appraiser's job to keep up with the market dynamics of their area. At Giles Appraisal Group, Inc., we know when property values have risen or declined. We're experts at analyzing value trends in Panama City, Bay County and surrounding areas. Faced with data from an appraiser, the mortgage company will often drop the PMI with little anxiety. At which time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: