Let Anderson Appraisal, LLC help you determine if you can cancel your PMI
When getting a mortgage, a 20% down payment is usually the standard. Since the liability for the lender is oftentimes only the remainder between the home value and the amount remaining on the loan, the 20% adds a nice cushion against the costs of foreclosure, reselling the home, and regular value variationson the chance that a borrower doesn't pay.
During the recent mortgage upturn of the last decade, it became common to see lenders taking down payments of 10, 5 or often 0 percent. A lender is able to manage the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. This added plan covers the lender if a borrower is unable to pay on the loan and the value of the property is less than the balance of the loan.
PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and many times isn't even tax deductible. Contradictory to a piggyback loan where the lender takes in all the losses, PMI is advantageous for the lender because they obtain the money, and they receive payment 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 buyers can avoid paying PMI
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law guarantees 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 a little earlier.
It can take many years to arrive at the point where the principal is just 20% of the original amount borrowed, so it's crucial to know how your home has increased in value. After all, every bit of appreciation you've achieved over the years counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Despite the fact that nationwide trends predict decreasing home values, realize that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home might have secured equity before things settled down.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. It is an appraiser's job to keep up with the market dynamics of their area. At Anderson Appraisal, LLC, we're experts at determining value trends in Amarillo, Randall 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 most often do away with the PMI with little effort. At which 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: