Let help you decide if you can eliminate your PMI
It's largely understood that a 20% down payment is the standard when getting a mortgage. The lender's risk is usually only the remainder between the home value and the sum due on the loan, so the 20% adds a nice buffer against the costs of foreclosure, selling the home again, and regular value fluctuations on the chance that a purchaser defaults.
Lenders were accepting down payments down to 10, 5 and even 0 percent during the mortgage boom of the last decade. How does a lender endure the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This additional plan covers the lender in case a borrower is unable to pay on the loan and the worth of the property is lower than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and many times isn't even tax deductible, PMI is pricey to a borrower. It's beneficial for the lender because they obtain the money, and they get the money if the borrower defaults, opposite 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 homeowners can keep from bearing the cost of PMI
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law stipulates that, at the request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent. So, acute homeowners can get off the hook sooner than expected.
Because it can take countless years to reach the point where the principal is only 20% of the initial amount borrowed, it's necessary to know how your home has appreciated in value. After all, all of the appreciation you've achieved over time counts towards dismissing PMI. So why pay it after your loan balance has fallen below the 80% mark? Despite the fact that nationwide trends forecast declining home values, understand 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 goes over the 20% point, as it's a hard thing to know. It's an appraiser's job to know the market dynamics of their area. At , we're experts at pinpointing value trends in Decatur, Dekalb County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will most often do away with the PMI with little anxiety. At which time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: