Let MFC Home Appraisals Inc help you determine if you can eliminate your PMI
A 20% down payment is typically accepted when getting a mortgage. Because the risk for the lender is often only the remainder between the home value and the amount due on the loan, the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and regular value variationsin the event a borrower doesn't pay.
During the recent mortgage upturn of the mid 2000s, it became common to see lenders taking down payments of 10, 5 or sometimes 0 percent. How does a lender handle the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower doesn't pay on the loan and the worth of the property is less than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and many times isn't even tax deductible, PMI can be costly 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 costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homeowners keep from paying PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Keen homeowners can get off the hook a little early. The law promises that, at the request of the homeowner, the PMI must be released when the principal amount equals just 80 percent.
Because it can take countless years to arrive at the point where the principal is just 20% of the original amount of the loan, it's important to know how your home has increased in value. After all, all of the appreciation you've accomplished over the years counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Your neighborhood might not be minding the national trends and/or your home may have gained equity before things simmered down, so even when nationwide trends signify plunging home values, you should realize that real estate is local.
The hardest thing for most home owners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. As appraisers, it's our job to recognize the market dynamics of our area. At MFC Home Appraisals Inc, we know when property values have risen or declined. We're experts at identifying value trends in Jupiter, Palm Beach County and surrounding areas. Faced with figures from an appraiser, the mortgage company will generally cancel the PMI with little effort. At which 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: