Let McCarthy Real Estate, Inc., Appraisal Services help you determine if you can get rid of your PMI
It's generally understood that a 20% down payment is accepted when purchasing a home. Since the liability for the lender is usually only the remainder between the home value and the amount remaining on the loan, the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and natural value fluctuationsin the event a purchaser defaults.
The market was working with down payments down to 10, 5 and often 0 percent during the mortgage boom of the last decade. A lender is able to endure the additional risk of the low down payment with Private Mortgage Insurance or PMI. This additional plan takes care of the lender in the event a borrower doesn't pay on the loan and the worth of the property is lower than what is owed on the loan.
PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and generally isn't even tax deductible. Different from a piggyback loan where the lender consumes all the losses, PMI is advantageous for the lender because they collect 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 can homeowners keep from bearing the expense of PMI?
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Acute home owners can get off the hook ahead of time. The law stipulates that, at the request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent.
It can take many years to reach the point where the principal is only 20% of the initial amount borrowed, so it's important to know how your home has grown in value. After all, any appreciation you've accomplished over the years counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% mark? Your neighborhood may not be adhering to the national trends and/or your home may have acquired equity before things calmed down, so even when nationwide trends indicate plummeting 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 hard thing to know. As appraisers, it's our job to understand the market dynamics of our area. At McCarthy Real Estate, Inc., Appraisal Services, we're masters at analyzing value trends in Marietta, Washington County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will usually eliminate the PMI with little effort. At that 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: