Let Barnes Appraisal Company help you learn if you can cancel your PMI
When getting a mortgage, a 20% down payment is usually the standard. Considering the liability for the lender is oftentimes only the remainder between the home value and the sum outstanding on the loan, the 20% provides a nice buffer against the expenses of foreclosure, reselling the home, and natural value changesin the event a purchaser is unable to pay.
During the recent mortgage upturn of the mid 2000s, it was customary to see lenders commanding down payments of 10, 5 or sometimes 0 percent. A lender is able to handle the added risk of the small down payment with Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower doesn't pay on the loan and the value of the home is less than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and frequently isn't even tax deductible, PMI is costly to a borrower. It's money-making for the lender because they secure the money, and they get paid if the borrower defaults, opposite from a piggyback loan where the lender consumes all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homebuyer keep from bearing the cost of PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Savvy 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 abandoned when the principal amount reaches only 80 percent.
Considering it can take countless years to reach the point where the principal is only 20% of the initial loan amount, it's necessary to know how your home has appreciated in value. After all, all of the appreciation you've obtained over time counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% threshold? Your neighborhood might not be minding the national trends and/or your home could have gained equity before things calmed down, so even when nationwide trends forecast declining home values, you should realize that real estate is local.
A certified, licensed real estate appraiser can help homeowners 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 Barnes Appraisal Company, we know when property values have risen or declined. We're experts at recognizing value trends in Lawton, Comanche County and surrounding areas. When faced with information from an appraiser, the mortgage company will usually drop the PMI with little trouble. At which 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: