Let Advanced Appraisal Services, LLC help you discover if you can cancel your PMI
It's generally known that a 20% down payment is common when getting a mortgage. The lender's liability is often only the difference between the home value and the amount outstanding on the loan, so the 20% adds a nice buffer against the charges of foreclosure, reselling the home, and regular value variations on the chance that a borrower defaults.
During the recent mortgage boom of the last decade, it was customary to see lenders commanding down payments of 10, 5 or even 0 percent. A lender is able to endure the additional risk of the small down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower is unable to pay on the loan and the value of the property is less than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and many times isn't even tax deductible, PMI can be pricey to a borrower. Unlike a piggyback loan where the lender absorbs all the deficits, PMI is beneficial for the lender because they obtain the money, and they get paid 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 home buyers can 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 cease the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Wise homeowners can get off the hook ahead of time. The law stipulates that, upon 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 just 20% of the original amount of the loan, so it's important to know how your home has grown in value. After all, every bit of appreciation you've acquired over time counts towards dismissing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood might not be adhering to the national trends and/or your home could have gained equity before things cooled off, so even when nationwide trends signify falling home values, you should realize that real estate is local.
The toughest thing for most home owners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can surely help. It's an appraiser's job to keep up with the market dynamics of their area. At Advanced Appraisal Services, LLC, we know when property values have risen or declined. We're experts at identifying value trends in Honolulu, Honolulu County and surrounding areas. Faced with figures from an appraiser, the mortgage company will often drop the PMI with little anxiety. At that time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: