Let McCarthy Real Estate, Inc., Appraisal Services help you determine if you can cancel your PMI
A 20% down payment is usually accepted when buying a house. The lender's liability is usually only the remainder between the home value and the sum remaining on the loan, so the 20% supplies a nice buffer against the charges of foreclosure, selling the home again, and regular value variations on the chance that a purchaser is unable to pay.
During the recent mortgage boom of the last decade, it was common to see lenders requiring down payments of 10, 5 or sometimes 0 percent. A lender is able to manage the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. This supplemental plan takes care of the lender in the event a borrower doesn't pay on the loan and the worth of the property is less than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and frequently isn't even tax deductible, PMI is pricey to a borrower. It's money-making for the lender because they secure the money, and they get paid if the borrower defaults, different from a piggyback loan where the lender consumes all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home buyer refrain from bearing the cost of PMI?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law designates that, upon request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent. So, savvy home owners can get off the hook ahead of time.
It can take countless years to arrive at the point where the principal is only 20% of the original loan amount, so it's crucial to know how your home has grown in value. After all, any appreciation you've achieved over the years counts towards dismissing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood may not be adopting the national trends and/or your home could have acquired equity before things simmered down, so even when nationwide trends signify decreasing home values, you should understand that real estate is local.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. As appraisers, it's our job to know the market dynamics of our area. At McCarthy Real Estate, Inc., Appraisal Services, we're experts at determining value trends in Marietta, Washington County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will often remove the PMI with little trouble. 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: