Let Thomas W. Steinhart help you learn if you can get rid of your PMI
When purchasing a home, a 20% down payment is usually the standard. Considering the risk for the lender is oftentimes only the remainder between the home value and the sum remaining on the loan, the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and typical value fluctuationson the chance that a borrower defaults.
The market was working with down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender handle the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower defaults on the loan and the worth of the house is lower than the loan balance.
PMI can be costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and generally isn't even tax deductible. Opposite from a piggyback loan where the lender takes in all the losses, PMI is beneficial for the lender because they collect 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 home buyer prevent bearing the expense of PMI?
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Acute homeowners can get off the hook a little early. The law promises that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent.
Because it can take countless years to arrive at the point where the principal is just 20% of the initial loan amount, it's crucial to know how your home has grown in value. After all, all of the appreciation you've accomplished over the years counts towards dismissing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Even when 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 could have secured equity before things calmed 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. It's an appraiser's job to know the market dynamics of their area. At Thomas W. Steinhart, we're masters at recognizing value trends in Westfield, Hamilton County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will most often do away with the PMI with little anxiety. At that time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: