Let Mark Schofield Appraisal Services help you decide if you can cancel your PMI
It's largely known that a 20% down payment is common when buying a house. Considering the risk for the lender is often only the remainder between the home value and the amount due on the loan, the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and typical value variationson the chance that a purchaser doesn't pay.
During the recent mortgage upturn of the mid 2000s, it was widespread to see lenders requiring down payments of 10, 5 or sometimes 0 percent. How does a lender handle the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower doesn't pay on the loan and the worth of the property is less than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI is pricey to a borrower. Contradictory to a piggyback loan where the lender takes in all the damages, PMI is beneficial for the lender because they acquire the money, and they get the money if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How buyers can keep from bearing the expense of PMI
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically cease the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Acute home owners can get off the hook sooner than expected. The law designates that, at the request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent.
It can take many years to reach the point where the principal is only 20% of the initial loan amount, so it's essential to know how your home has grown in value. After all, every bit of appreciation you've gained over time counts towards removing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Your neighborhood may not be heeding the national trends and/or your home may have acquired equity before things cooled off, so even when nationwide trends predict decreasing home values, you should understand that real estate is local.
The difficult thing for most homeowners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can certainly help. It's an appraiser's job to keep up with the market dynamics of their area. At Mark Schofield Appraisal Services , we know when property values have risen or declined. We're experts at analyzing value trends in St Johns, Saint Johns County and surrounding areas. Faced with information from an appraiser, the mortgage company will often do away with the PMI with little effort. At which time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: