Let Weaver Appraisal Group help you learn if you can eliminate your PMI
A 20% down payment is typically accepted when purchasing a home. The lender's liability is oftentimes only the remainder between the home value and the amount outstanding on the loan, so the 20% provides a nice cushion against the costs of foreclosure, reselling the home, and natural value variations on the chance that a borrower defaults.
Lenders were taking down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the added risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower defaults on the loan and the worth of the home is less than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and generally isn't even tax deductible, PMI is pricey to a borrower. It's profitable for the lender because they obtain the money, and they get paid if the borrower is unable to pay, different 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 homebuyers can keep from bearing the cost of PMI
The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law pledges that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, savvy home owners can get off the hook a little earlier.
It can take countless years to arrive at the point where the principal is just 20% of the original loan amount, so it's important to know how your home has increased in value. After all, any appreciation you've obtained over the years counts towards abolishing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Despite the fact that nationwide trends signify decreasing home values, realize that real estate is local. Your neighborhood may not be minding the national trends and/or your home could have gained equity before things cooled off.
The toughest thing for many homeowners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can certainly help. As appraisers, it's our job to recognize the market dynamics of our area. At Weaver Appraisal Group, we know when property values have risen or declined. We're experts at pinpointing value trends in Butner, Granville County and surrounding areas. Faced with data from an appraiser, the mortgage company will usually cancel the PMI with little anxiety. At which time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: