Let Real Property Metrics help you figure out if you can cancel your PMI
It's largely known that a 20% down payment is common when purchasing a home. Because the risk for the lender is usually only the remainder between the home value and the sum due on the loan, the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and typical value changesin the event a borrower is unable to pay.
Lenders were accepting down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplementary plan protects the lender in the event a borrower defaults on the loan and the worth of the property is lower than what the borrower still owes on the loan.
PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and frequently isn't even tax deductible. It's money-making for the lender because they secure the money, and they get the money if the borrower doesn't pay, separate from a piggyback loan where the lender consumes 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 keep from paying PMI
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law designates that, at the request of the home owner, the PMI must be released when the principal amount equals just 80 percent. So, acute homeowners can get off the hook ahead of time.
It can take countless years to reach the point where the principal is just 20% of the initial amount of the loan, so it's important to know how your home has appreciated in value. After all, all of the appreciation you've gained over the years counts towards dismissing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Despite the fact that nationwide trends forecast decreasing home values, be aware that real estate is local. Your neighborhood may not be minding the national trends and/or your home may have secured equity before things calmed down.
The hardest thing for almost all homeowners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can surely help. It is an appraiser's job to keep up with the market dynamics of their area. At Real Property Metrics, we're experts at identifying value trends in Lake Worth, Palm Beach 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 retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: