Let Verschelden Appraisals help you determine if you can cancel your PMI
It's typically inferred that a 20% down payment is the standard when getting a mortgage. The lender's risk is often only the remainder between the home value and the amount due on the loan, so the 20% supplies a nice buffer against the expenses of foreclosure, reselling the home, and typical value changes on the chance that a purchaser is unable to pay.
Lenders were accepting down payments down to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. A lender is able to endure the added risk of the minimal down payment with Private Mortgage Insurance or PMI. This added policy covers the lender if a borrower defaults on the loan and the market price of the property is less than the balance of the loan.
PMI is costly to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and oftentimes isn't even tax deductible. Contradictory to a piggyback loan where the lender takes in all the costs, PMI is advantageous for the lender because they obtain the money, and they receive payment 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 homeowners can refrain from paying PMI
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law designates that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent. So, wise homeowners can get off the hook a little earlier.
Because it can take countless years to get to the point where the principal is only 20% of the original amount of the loan, it's necessary to know how your home has grown in value. After all, any appreciation you've acquired over the years counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not be reflecting the national trends and/or your home could have secured equity before things simmered down, so even when nationwide trends signify plunging home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help home owners 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 keep up with the market dynamics of our area. At Verschelden Appraisals, we're experts at identifying value trends in Modesto, Stanislaus County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will most often eliminate the PMI with little effort. At which 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: