Let help you figure out if you can get rid of your PMI
A 20% down payment is usually the standard when purchasing a home. Considering the risk for the lender is oftentimes only the difference between the home value and the amount due on the loan, the 20% provides a nice cushion against the expenses of foreclosure, selling the home again, and natural value changesin the event a borrower defaults.
Banks were accepting down payments down to 10, 5 and even 0 percent during the mortgage boom of the last decade. How does a lender handle the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI covers the lender if a borrower doesn't pay on the loan and the worth of the house is less than what is owed on the loan.
PMI can be pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and often isn't even tax deductible. Unlike a piggyback loan where the lender absorbs all the deficits, PMI is advantageous for the lender because they secure the money, and they get the money if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homeowners refrain from bearing the cost of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically cancel 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 home owner, the PMI must be dropped when the principal amount reaches only 80 percent. So, acute homeowners can get off the hook a little earlier.
Since it can take countless years to get to the point where the principal is only 20% of the initial amount borrowed, it's important to know how your home has increased in value. After all, every bit of appreciation you've achieved over time counts towards removing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood may not be reflecting the national trends and/or your home might have secured equity before things cooled off, so even when nationwide trends forecast falling home values, you should realize that real estate is local.
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 hard thing to know. It's an appraiser's job to understand the market dynamics of their area. At , we're masters at identifying value trends in , Baltimore County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will usually cancel the PMI with little effort. At that 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: