Let MANDERFIELD APPRAISAL GROUP help you decide if you can cancel your PMI
It's generally known that a 20% down payment is accepted when purchasing a home. Since the liability for the lender is usually only the remainder between the home value and the sum due on the loan, the 20% provides a nice buffer against the charges of foreclosure, selling the home again, and natural value variationson the chance that a borrower defaults.
During the recent mortgage boom of the mid 2000s, it became common to see lenders commanding down payments of 10, 5 or sometimes 0 percent. How does a lender manage the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower is unable to pay on the loan and the worth of the home is less than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI is costly to a borrower. Contradictory to a piggyback loan where the lender consumes all the losses, PMI is advantageous for the lender because they collect the money, and they get paid 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 can a buyer prevent bearing the expense of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Acute homeowners can get off the hook beforehand. The law promises that, upon request of the home owner, the PMI must be released when the principal amount reaches only 80 percent.
Considering it can take many years to get to the point where the principal is just 20% of the original amount borrowed, it's essential to know how your home has appreciated in value. After all, every bit of appreciation you've achieved over the years counts towards dismissing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Even when nationwide trends signify plummeting home values, understand that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home might have acquired equity before things calmed down.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At MANDERFIELD APPRAISAL GROUP, we're masters at recognizing value trends in Alexandria, Alexandria City County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will generally do away with the PMI with little trouble. At that 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: