Let Country Manor help you determine if you can cancel your PMI
When buying a house, a 20% down payment is typically the standard. The lender's liability is generally only the difference between the home value and the sum outstanding on the loan, so the 20% adds a nice buffer against the charges of foreclosure, selling the home again, and typical value changes on the chance that a purchaser defaults.
The market was accepting down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. This added plan takes care of the lender in the event a borrower is unable to pay on the loan and the value of the property is lower than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and often isn't even tax deductible, PMI is costly to a borrower. Contradictory to a piggyback loan where the lender takes in all the damages, PMI is advantageous for the lender because they obtain the money, and they get the money if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home owners can prevent bearing the expense 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 original loan amount. Acute homeowners can get off the hook a little early. The law designates that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent.
It can take many years to get to the point where the principal is just 20% of the original loan amount, so it's necessary to know how your home has increased in value. After all, every bit of appreciation you've obtained over time counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Even when nationwide trends indicate plunging home values, understand that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home might have secured equity before things simmered down.
The difficult thing for almost all homeowners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can surely help. It's an appraiser's job to keep up with the market dynamics of their area. At Country Manor, we know when property values have risen or declined. We're masters at identifying value trends in Medina, Medina County and surrounding areas. When faced with information from an appraiser, the mortgage company will most often remove the PMI with little trouble. 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: