Let Furr Appraisal Service help you figure out if you can cancel your PMI
A 20% down payment is typically accepted when getting a mortgage. Since the risk for the lender is generally only the difference between the home value and the sum due on the loan, the 20% supplies a nice cushion against the costs of foreclosure, selling the home again, and typical value variationson the chance that a purchaser is unable to pay.
The market was accepting down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the increased risk of the low down payment with Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower is unable to pay on the loan and the value of the home is lower than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible, PMI is costly to a borrower. Unlike a piggyback loan where the lender takes in all the costs, PMI is lucrative for the lender because they collect the money, and they receive payment if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home owners can refrain from bearing the cost of PMI
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Acute home owners can get off the hook a little early. The law pledges that, upon request of the homeowner, the PMI must be released when the principal amount equals just 80 percent.
Since it can take countless years to get to the point where the principal is just 20% of the initial amount borrowed, it's important to know how your home has grown in value. After all, all of the appreciation you've gained over time counts towards abolishing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Even when nationwide trends signify declining home values, be aware that real estate is local. Your neighborhood may not be minding the national trends and/or your home could have acquired equity before things settled down.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. It's an appraiser's job to know the market dynamics of their area. At Furr Appraisal Service, we're experts at analyzing value trends in Camden, Benton County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will generally remove the PMI with little trouble. 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: