Let Appraisals Plus help you determine if you can eliminate your PMI
When buying a house, a 20% down payment is usually the standard. Because the risk for the lender is oftentimes only the remainder between the home value and the sum due on the loan, the 20% supplies a nice cushion against the charges of foreclosure, reselling the home, and typical value variationsin the event a borrower defaults.
During the recent mortgage upturn of the mid 2000s, it became common to see lenders taking down payments of 10, 5 or sometimes 0 percent. A lender is able to handle the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower is unable to pay on the loan and the worth of the home is less than the balance of the loan.
PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and often isn't even tax deductible. It's advantageous for the lender because they obtain the money, and they get paid if the borrower is unable to pay, separate from a piggyback loan where the lender takes in all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home owners can refrain from bearing the cost of PMI
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically stop the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law guarantees that, upon request of the homeowner, the PMI must be released when the principal amount equals only 80 percent. So, keen home owners can get off the hook ahead of time.
It can take many years to get to the point where the principal is just 20% of the initial loan amount, so it's crucial to know how your home has grown in value. After all, every bit of appreciation you've obtained over the years counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% mark? Even when nationwide trends forecast falling home values, realize that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home may have secured equity before things simmered down.
The hardest thing for almost all home owners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. It is an appraiser's job to understand the market dynamics of their area. At Appraisals Plus, we're masters at recognizing value trends in Philadelphia, Philadelphia 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 most often do away with the PMI with little anxiety. 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: