Let Mitchell Appraisals help you determine if you can cancel your PMI
A 20% down payment is usually accepted when purchasing a home. Considering the risk for the lender is usually only the difference between the home value and the amount outstanding on the loan, the 20% provides a nice cushion against the charges of foreclosure, selling the home again, and natural value variationson the chance that a purchaser doesn't pay.
Lenders were working with down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to endure the added risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower doesn't pay on the loan and the value of the property is lower than the loan balance.
PMI can be pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and often isn't even tax deductible. It's money-making for the lender because they collect the money, and they receive payment if the borrower defaults, separate from a piggyback loan where the lender absorbs all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home buyer refrain from paying PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Wise home owners can get off the hook ahead of time. The law states that, at the request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent.
Considering it can take many years to arrive at the point where the principal is just 20% of the initial amount borrowed, it's necessary to know how your home has appreciated in value. After all, all of the appreciation you've acquired over time counts towards abolishing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Your neighborhood might not be following the national trends and/or your home could have acquired equity before things settled down, so even when nationwide trends hint at plummeting home values, you should understand that real estate is local.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. As appraisers, it's our job to understand the market dynamics of our area. At Mitchell Appraisals, we know when property values have risen or declined. We're masters at analyzing value trends in Navarre, Santa Rosa County and surrounding areas. Faced with data from an appraiser, the mortgage company will usually eliminate the PMI with little trouble. 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: