Let Weaver Appraisal Group help you learn if you can cancel your PMI
It's generally known that a 20% down payment is common when getting a mortgage. The lender's risk is generally only the difference between the home value and the amount due on the loan, so the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and regular value fluctuations in the event a purchaser doesn't pay.
During the recent mortgage boom of the last decade, it was customary to see lenders taking down payments of 10, 5 or even 0 percent. A lender is able to endure the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. This supplemental policy covers the lender in the event a borrower is unable to pay on the loan and the value of the house is lower than the balance of the loan.
PMI is costly to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and many times isn't even tax deductible. Contradictory to a piggyback loan where the lender takes in all the costs, PMI is favorable 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 buyers can avoid bearing the cost 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 reaches 78 percent of the primary loan amount. Keen homeowners can get off the hook sooner than expected. The law designates that, upon request of the home owner, the PMI must be released when the principal amount equals only 80 percent.
It can take countless years to get to the point where the principal is just 20% of the original amount of the loan, so it's crucial to know how your home has grown in value. After all, any appreciation you've acquired over the years counts towards removing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Despite the fact that nationwide trends indicate plunging home values, be aware that real estate is local. Your neighborhood might not be minding the national trends and/or your home might have secured equity before things simmered down.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. It's an appraiser's job to keep up with the market dynamics of their area. At Weaver Appraisal Group, we know when property values have risen or declined. We're masters at determining value trends in Butner, Granville County and surrounding areas. When faced with figures from an appraiser, the mortgage company will most often remove the PMI with little anxiety. At which 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: