Let Slater Real Estate Services help you determine if you can cancel your PMI
A 20% down payment is usually the standard when buying a house. 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 cushion against the charges of foreclosure, selling the home again, and regular value fluctuationson the chance that a purchaser is unable to pay.
During the recent mortgage upturn of the last decade, it became customary to see lenders requiring down payments of 10, 5 or sometimes 0 percent. A lender is able to manage the additional risk of the small down payment with Private Mortgage Insurance or PMI. This additional plan guards the lender in the event a borrower defaults on the loan and the worth of the home is less than what the borrower still owes on the loan.
PMI can be pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and often isn't even tax deductible. Unlike a piggyback loan where the lender consumes all the costs, PMI is money-making for the lender because they secure the money, and they receive payment 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 home buyers can avoid paying PMI
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law designates that, at the request of the home owner, the PMI must be released when the principal amount reaches just 80 percent. So, acute home owners can get off the hook ahead of time.
It can take countless years to get to the point where the principal is only 20% of the initial amount of the loan, so it's necessary to know how your home has increased in value. After all, all of the appreciation you've acquired over time counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% threshold? Even when nationwide trends forecast plummeting home values, understand that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home might have acquired equity before things settled down.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over 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 Slater Real Estate Services, we're masters at analyzing value trends in Windsor, Weld County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will generally remove the PMI with little anxiety. At that time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: