Let help you determine if you can get rid of your PMI
A 20% down payment is usually accepted when buying a house. Since the risk for the lender is oftentimes only the remainder between the home value and the amount outstanding on the loan, the 20% provides a nice cushion against the costs of foreclosure, reselling the home, and natural value changesin the event a purchaser defaults.
The market was taking down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the added risk of the low down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower doesn't pay on the loan and the worth of the home is lower than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and many times isn't even tax deductible, PMI can be expensive to a borrower. It's lucrative for the lender because they collect the money, and they receive payment if the borrower is unable to pay, opposite from a piggyback loan where the lender takes in 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 owner keep from 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. The law promises that, at the request of the home owner, the PMI must be released when the principal amount equals only 80 percent. So, wise home owners can get off the hook a little early.
It can take countless years to get to the point where the principal is only 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 time 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 decreasing home values, realize that real estate is local. Your neighborhood may not be heeding the national trends and/or your home could have secured equity before things cooled off.
The hardest thing for most home owners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can definitely help. It is an appraiser's job to understand the market dynamics of their area. At , we're experts at analyzing value trends in , Clark County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will generally cancel the PMI with little anxiety. 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: