Let Floyd Appraisal Works help you figure out if you can cancel your PMI
When buying a house, a 20% down payment is typically the standard. Since the liability for the lender is generally only the difference between the home value and the sum outstanding on the loan, the 20% provides a nice cushion against the expenses of foreclosure, reselling the home, and typical value fluctuationsin the event a purchaser doesn't pay.
During the recent mortgage boom of the last decade, it was widespread to see lenders commanding down payments of 10, 5 or often 0 percent. A lender is able to endure the added risk of the minimal down payment with Private Mortgage Insurance or PMI. This supplementary policy takes care of the lender in case a borrower is unable to pay on the loan and the value of the home is lower than the balance of the loan.
PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and frequently isn't even tax deductible. Contradictory to a piggyback loan where the lender takes in all the losses, PMI is advantageous for the lender because they obtain the money, and they receive payment if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How buyers can prevent paying PMI
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically stop the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law pledges that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, keen homeowners can get off the hook a little early.
Considering it can take many years to reach the point where the principal is only 20% of the original amount borrowed, it's necessary to know how your home has appreciated in value. After all, every bit of appreciation you've accomplished over the years counts towards removing PMI. So what's the reason for paying 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 gained equity before things simmered down, so even when nationwide trends predict falling home values, you should understand that real estate is local.
The difficult thing for many home owners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can definitely help. As appraisers, it's our job to understand the market dynamics of our area. At Floyd Appraisal Works, we're masters at identifying value trends in Hohenwald, Lewis County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will usually do away with 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: