Let Floyd Appraisal Works help you learn if you can eliminate your PMI
It's widely inferred that a 20% down payment is common when getting a mortgage. Since the risk for the lender is often 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 fluctuationsin the event a borrower defaults.
Banks were working with down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower defaults on the loan and the value of the property is lower than what the borrower still owes on the loan.
PMI is pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and often isn't even tax deductible. It's favorable for the lender because they collect the money, and they get paid if the borrower defaults, separate 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 homeowners refrain from paying PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Smart home owners can get off the hook a little earlier. The law states that, at the request of the home owner, the PMI must be released when the principal amount reaches just 80 percent.
Because it can take countless years to arrive at the point where the principal is only 20% of the initial loan amount, it's crucial to know how your home has grown in value. After all, every bit of appreciation you've obtained over the years counts towards removing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Despite the fact that nationwide trends predict plunging home values, be aware that real estate is local. Your neighborhood may not be following the national trends and/or your home might have secured equity before things settled down.
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 understand the market dynamics of our area. At Floyd Appraisal Works, we're experts at identifying value trends in Hohenwald, Lewis County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will often cancel the PMI with little trouble. At which time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: