Let Appraisal Services of Brandon, Inc . help you decide if you can cancel your PMI
When getting a mortgage, a 20% down payment is usually the standard. The lender's risk is oftentimes only the difference between the home value and the amount remaining on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, reselling the home, and typical value fluctuations in the event a borrower is unable to pay.
The market was taking down payments as low as 10, 5 and often 0 percent during the mortgage boom of the last decade. A lender is able to endure the added risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI protects the lender if a borrower doesn't pay on the loan and the value of the property is lower than the balance of the loan.
PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and many times isn't even tax deductible. Different from a piggyback loan where the lender absorbs all the losses, PMI is beneficial for the lender because they secure the money, and they get the money 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 home buyers can avoid 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. The law promises that, upon request of the home owner, the PMI must be released when the principal amount equals only 80 percent. So, savvy homeowners can get off the hook ahead of time.
It can take many years to reach the point where the principal is just 20% of the original loan amount, so it's crucial to know how your home has appreciated in value. After all, all of the appreciation you've gained over the years counts towards removing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Your neighborhood may not be minding the national trends and/or your home may have gained equity before things settled down, so even when nationwide trends forecast decreasing home values, you should understand that real estate is local.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. It's an appraiser's job to keep up with the market dynamics of their area. At Appraisal Services of Brandon, Inc ., we're masters at determining value trends in Valrico, Hillsborough 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 generally remove the PMI with little effort. At that 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: