Let help you discover if you can eliminate your PMIWhen getting a mortgage, a 20% down payment is usually the standard. Since the risk for the lender is oftentimes only the difference between the home value and the amount outstanding on the loan, the 20% supplies a nice cushion against the costs of foreclosure, selling the home again, and natural value fluctuationsin the event a purchaser defaults. During the recent mortgage upturn of the mid 2000s, it became common to see lenders requiring down payments of 10, 5 or often 0 percent. A lender is able to manage the increased risk of the small down payment with Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower doesn't pay on the loan and the worth of the property is less than what the borrower still owes on the loan. Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and generally isn't even tax deductible, PMI is pricey to a borrower. It's beneficial for the lender because they secure the money, and they get paid if the borrower is unable to pay, different from a piggyback loan where the lender absorbs all the damages. ![]() Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI. How can homebuyers prevent bearing the expense of PMI?With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically stop the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law states that, upon request of the home owner, the PMI must be released when the principal amount reaches only 80 percent. So, savvy home owners can get off the hook ahead of time. Because it can take many years to arrive at the point where the principal is only 20% of the initial amount of the loan, it's essential to know how your home has appreciated in value. After all, all of the appreciation you've accomplished over time counts towards abolishing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Even when nationwide trends signify plummeting home values, realize that real estate is local. Your neighborhood might not be following the national trends and/or your home might have secured equity before things settled down. The difficult thing for many homeowners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can certainly help. As appraisers, it's our job to understand the market dynamics of our area. At , we know when property values have risen or declined. We're masters at analyzing value trends in , Baltimore County and surrounding areas. When faced with information from an appraiser, the mortgage company will most often do away with the PMI with little anxiety. At that 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: |