Let Weaver Appraisal Group help you decide if you can cancel your PMI
It's largely inferred that a 20% down payment is common when buying a house. Because the liability for the lender is often only the remainder between the home value and the amount outstanding on the loan, the 20% adds a nice buffer against the expenses of foreclosure, reselling the home, and natural value fluctuationson the chance that a purchaser is unable to pay.
During the recent mortgage boom of the last decade, it was widespread to see lenders requiring down payments of 10, 5 or even 0 percent. A lender is able to endure the added risk of the minimal down payment with Private Mortgage Insurance or PMI. This supplemental plan takes care of the lender in case a borrower is unable to pay on the loan and the value of the property is lower than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and many times isn't even tax deductible, PMI can be pricey to a borrower. It's money-making for the lender because they acquire the money, and they receive payment if the borrower defaults, separate from a piggyback loan where the lender takes in all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home buyers can prevent bearing the cost of PMI
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law designates that, upon request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent. So, acute home owners can get off the hook ahead of time.
It can take countless years to get to the point where the principal is only 20% of the initial amount of the loan, so it's crucial to know how your home has appreciated in value. After all, all of the appreciation you've achieved over the years counts towards abolishing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Your neighborhood may not be minding the national trends and/or your home may have gained equity before things simmered down, so even when nationwide trends hint at plunging home values, you should realize that real estate is local.
The difficult thing for most 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 is an appraiser's job to recognize the market dynamics of their area. At Weaver Appraisal Group, we know when property values have risen or declined. We're experts at identifying value trends in Butner, Granville County and surrounding areas. When faced with data from an appraiser, the mortgage company will most often drop the PMI with little trouble. 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: