Let Barnes Appraisal Company help you discover if you can cancel your PMI
When getting a mortgage, a 20% down payment is usually the standard. The lender's liability is usually only the difference between the home value and the sum outstanding on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, reselling the home, and natural value changes on the chance that a borrower is unable to pay.
During the recent mortgage upturn of the last decade, it became common to see lenders commanding down payments of 10, 5 or often 0 percent. A lender is able to handle the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplemental plan takes care of the lender if a borrower doesn't pay on the loan and the value of the house is less than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI can be pricey to a borrower. It's profitable for the lender because they obtain the money, and they get the money if the borrower is unable to pay, opposite from a piggyback loan where the lender consumes all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homebuyers can prevent bearing the cost of PMI
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law states that, upon request of the home owner, the PMI must be dropped when the principal amount reaches only 80 percent. So, wise homeowners can get off the hook a little earlier.
Because it can take countless years to reach the point where the principal is only 20% of the original amount borrowed, it's essential to know how your home has grown in value. After all, every bit of appreciation you've acquired over time counts towards abolishing PMI. So why pay it after your loan balance has dropped below the 80% mark? Your neighborhood might not be reflecting the national trends and/or your home could have secured equity before things calmed down, so even when nationwide trends signify decreasing home values, you should realize that real estate is local.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At Barnes Appraisal Company, we know when property values have risen or declined. We're experts at pinpointing value trends in Lawton, Comanche County and surrounding areas. Faced with figures from an appraiser, the mortgage company will usually eliminate the PMI with little anxiety. At that time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: