Let Allen Appraisal Service help you figure out if you can get rid of your PMI
It's typically understood that a 20% down payment is common when getting a mortgage. Considering the risk for the lender is oftentimes only the remainder between the home value and the sum outstanding on the loan, the 20% adds a nice buffer against the charges of foreclosure, reselling the home, and natural value changesin the event a borrower is unable to pay.
During the recent mortgage upturn of the last decade, it was common to see lenders requiring down payments of 10, 5 or sometimes 0 percent. A lender is able to manage the added risk of the small down payment with Private Mortgage Insurance or PMI. This additional plan guards the lender if a borrower doesn't pay on the loan and the market price of the property is less than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and frequently isn't even tax deductible, PMI is pricey to a borrower. It's money-making for the lender because they obtain the money, and they get the money if the borrower doesn't pay, unlike a piggyback loan where the lender takes in all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homeowners prevent paying PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Smart home owners can get off the hook a little early. The law designates that, at the request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent.
Considering it can take countless years to get to the point where the principal is just 20% of the original loan amount, it's crucial to know how your home has grown in value. After all, any appreciation you've achieved over the years counts towards abolishing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Even when nationwide trends predict plunging home values, understand that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home may have acquired equity before things cooled off.
The difficult thing for most homeowners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can definitely help. As appraisers, it's our job to know the market dynamics of our area. At Allen Appraisal Service, we know when property values have risen or declined. We're masters at determining value trends in St. George, Washington County and surrounding areas. When faced with information from an appraiser, the mortgage company will generally do away with the PMI with little effort. At that time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link:
Would you like to save money by not having to pay for Private Mortgage Insurance? We can help. Simply fill out the form below as completely as possible and we'll send you information on how to save PMI expenses, with no obligation to you. We guarantee your privacy.