Let Personal Service Realty's Residential Valuation Group help you learn if you can cancel your PMI
When getting a mortgage, a 20% down payment is usually the standard. The lender's liability is oftentimes only the remainder between the home value and the sum outstanding on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and regular value fluctuations in the event a purchaser 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 sometimes 0 percent. How does a lender endure the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower is unable to pay on the loan and the value of the home is lower than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and frequently isn't even tax deductible, PMI is pricey to a borrower. Unlike a piggyback loan where the lender consumes all the deficits, PMI is lucrative for the lender because they obtain the money, and they get the money if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homeowner prevent bearing the expense of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Wise home owners can get off the hook beforehand. The law promises that, at the request of the home owner, the PMI must be released when the principal amount equals just 80 percent.
Considering it can take many years to arrive at the point where the principal is only 20% of the original loan amount, it's important to know how your home has increased in value. After all, every bit of appreciation you've accomplished over time counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Despite the fact that nationwide trends predict decreasing home values, understand that real estate is local. Your neighborhood may not be minding the national trends and/or your home may have acquired equity before things settled down.
The toughest thing for most homeowners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can certainly help. It is an appraiser's job to understand the market dynamics of their area. At Personal Service Realty's Residential Valuation Group, we know when property values have risen or declined. We're experts at determining value trends in Jacksonville, Duval County and surrounding areas. When faced with data from an appraiser, the mortgage company will generally remove the PMI with little anxiety. At that time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link:
Would you like to save money by not having to pay for Private Mortgage Insurance? We can help. Simply fill out the form below as completely as possible and we'll send you information on how to save PMI expenses, with no obligation to you. We guarantee your privacy.