Let Meyer Lane Appraisals help you learn if you can cancel your PMI
It's largely inferred that a 20% down payment is common when getting a mortgage. The lender's risk is oftentimes only the difference between the home value and the sum outstanding on the loan, so the 20% adds a nice cushion against the expenses of foreclosure, reselling the home, and natural value variations on the chance that a purchaser is unable to pay.
Banks were working with down payments down to 10, 5 and even 0 percent during the mortgage boom of the last decade. A lender is able to manage the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplementary policy covers the lender in case a borrower is unable to pay on the loan and the value of the house is lower than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and often isn't even tax deductible, PMI can be expensive to a borrower. It's favorable for the lender because they obtain the money, and they get paid if the borrower is unable to pay, contradictory to a piggyback loan where the lender consumes all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home owners can keep from bearing the cost of PMI
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically stop the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law designates that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent. So, savvy homeowners can get off the hook ahead of time.
Because it can take many years to reach the point where the principal is just 20% of the original amount of the loan, it's necessary to know how your home has grown in value. After all, every bit of appreciation you've achieved over the years counts towards abolishing PMI. So why pay it after your loan balance has dropped below the 80% mark? Your neighborhood might not be heeding the national trends and/or your home could have gained equity before things cooled off, so even when nationwide trends signify declining home values, you should realize that real estate is local.
The hardest thing for many homeowners 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 know the market dynamics of their area. At Meyer Lane Appraisals, we know when property values have risen or declined. We're masters at recognizing value trends in Hatboro, Montgomery County and surrounding areas. When faced with data from an appraiser, the mortgage company will generally do away with the PMI with little trouble. At that 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: