Let Country Manor help you decide if you can get rid of your PMI
It's widely known that a 20% down payment is accepted when buying a house. Since the liability for the lender is often only the remainder between the home value and the amount outstanding on the loan, the 20% provides a nice cushion against the charges of foreclosure, reselling the home, and natural value variationson the chance that a borrower defaults.
During the recent mortgage upturn of the mid 2000s, it became common to see lenders requiring down payments of 10, 5 or sometimes 0 percent. A lender is able to handle the increased risk of the low down payment with Private Mortgage Insurance or PMI. This supplemental policy protects the lender in the event a borrower doesn't pay on the loan and the worth of the property is less than what is owed on the loan.
PMI can be expensive to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and oftentimes isn't even tax deductible. Unlike a piggyback loan where the lender absorbs all the deficits, PMI is lucrative for the lender because they acquire the money, and they get the money if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home buyers prevent bearing the cost of PMI?
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law stipulates that, at the request of the homeowner, the PMI must be released when the principal amount equals only 80 percent. So, wise home owners can get off the hook sooner than expected.
Because it can take many years to reach the point where the principal is just 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 acquired over time counts towards removing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Your neighborhood may not be adopting the national trends and/or your home may have acquired equity before things calmed down, so even when nationwide trends hint at plunging home values, you should understand that real estate is local.
The toughest thing for many home owners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can definitely help. It's an appraiser's job to understand the market dynamics of their area. At Country Manor, we're experts at identifying value trends in Medina, Medina County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will most often remove the PMI with little effort. 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: