Let Mitchell Appraisals help you determine if you can cancel your PMI
A 20% down payment is typically the standard when purchasing a home. The lender's liability is usually only the remainder between the home value and the sum outstanding on the loan, so the 20% adds a nice cushion against the expenses of foreclosure, selling the home again, and regular value variations on the chance that a borrower is unable to pay.
During the recent mortgage boom of the mid 2000s, it became customary to see lenders taking down payments of 10, 5 or even 0 percent. A lender is able to endure the added risk of the minimal down payment with Private Mortgage Insurance or PMI. This supplemental plan guards the lender in the event a borrower doesn't pay on the loan and the value of the property is less than the loan balance.
PMI can be costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and frequently isn't even tax deductible. It's beneficial for the lender because they collect the money, and they receive payment if the borrower doesn't pay, contradictory to 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 a home owner avoid paying PMI?
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Keen home owners can get off the hook ahead of time. The law guarantees that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent.
Considering it can take many years to reach the point where the principal is just 20% of the original loan amount, it's necessary to know how your home has appreciated in value. After all, every bit of appreciation you've accomplished over time counts towards removing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Despite the fact that nationwide trends forecast decreasing home values, realize that real estate is local. Your neighborhood might not be following the national trends and/or your home may have acquired equity before things calmed down.
An accredited, licensed real estate appraiser can help home owners 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 keep up with the market dynamics of their area. At Mitchell Appraisals, we know when property values have risen or declined. We're experts at analyzing value trends in Navarre, Santa Rosa County and surrounding areas. Faced with data from an appraiser, the mortgage company will usually remove the PMI with little anxiety. At which time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: