Let Metro Appraisals help you figure out if you can get rid of your PMI
When purchasing a home, a 20% down payment is usually the standard. Because the risk for the lender is usually only the difference between the home value and the sum outstanding on the loan, the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and regular value fluctuationsin the event a borrower doesn't pay.
During the recent mortgage upturn of the mid 2000s, it became customary to see lenders requiring down payments of 10, 5 or often 0 percent. A lender is able to endure the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. This supplementary policy covers the lender in case a borrower is unable to pay on the loan and the market price of the home is less than the loan balance.
PMI is costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible. It's favorable for the lender because they secure the money, and they receive payment if the borrower doesn't pay, unlike a piggyback loan where the lender absorbs all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homebuyers can prevent bearing the expense of PMI
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law pledges that, at the request of the home owner, the PMI must be dropped when the principal amount reaches only 80 percent. So, acute homeowners can get off the hook ahead of time.
Considering it can take many years to arrive at the point where the principal is only 20% of the original amount of the loan, it's essential to know how your home has grown in value. After all, all of the appreciation you've obtained over the years counts towards dismissing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Even when nationwide trends indicate falling home values, realize that real estate is local. Your neighborhood may not be following the national trends and/or your home might have acquired equity before things calmed down.
The hardest thing for most home owners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can definitely help. As appraisers, it's our job to understand the market dynamics of our area. At Metro Appraisals, we're experts at determining value trends in Naples, Collier County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will often do away with the PMI with little anxiety. At which 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: