Let Weaver Appraisal Group help you figure out if you can cancel your PMI
It's typically inferred that a 20% down payment is the standard when purchasing a home. The lender's liability is usually 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, selling the home again, and regular value changes in the event a borrower doesn't pay.
During the recent mortgage boom of the last decade, it became common to see lenders commanding down payments of 10, 5 or even 0 percent. A lender is able to handle the added risk of the low down payment with Private Mortgage Insurance or PMI. This supplementary plan protects the lender in case a borrower is unable to pay on the loan and the value of the house is lower than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and generally isn't even tax deductible, PMI can be costly to a borrower. It's money-making for the lender because they obtain the money, and they get the money if the borrower doesn't pay, different from a piggyback loan where the lender takes in 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 a homeowner avoid bearing the expense 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 beginning loan amount. Savvy homeowners can get off the hook sooner than expected. The law pledges that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent.
It can take countless years to get to the point where the principal is only 20% of the original loan amount, so it's necessary to know how your home has increased in value. After all, every bit of appreciation you've obtained over the years counts towards abolishing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends forecast falling home values, realize that real estate is local. Your neighborhood may not be adopting the national trends and/or your home may have acquired equity before things calmed down.
The hardest thing for almost all homeowners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can definitely help. It is an appraiser's job to understand the market dynamics of their area. At Weaver Appraisal Group, we know when property values have risen or declined. We're experts at pinpointing value trends in Butner, Granville County and surrounding areas. When faced with data from an appraiser, the mortgage company will usually eliminate 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: