Let Thomas W. Steinhart help you determine if you can get rid of your PMI
When getting a mortgage, a 20% down payment is typically the standard. The lender's liability is oftentimes only the remainder between the home value and the amount outstanding on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, reselling the home, and regular value changes in the event a borrower is unable to pay.
The market was accepting down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to endure the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower defaults on the loan and the worth of the property is less than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and generally isn't even tax deductible, PMI is pricey to a borrower. Unlike a piggyback loan where the lender consumes all the damages, PMI is beneficial for the lender because they acquire the money, and they get paid 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 can a home owner refrain from paying PMI?
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law pledges that, at the request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent. So, savvy home owners can get off the hook sooner than expected.
Considering it can take countless years to reach the point where the principal is only 20% of the initial amount of the loan, it's crucial to know how your home has grown in value. After all, every bit of appreciation you've accomplished over the years counts towards abolishing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Your neighborhood might not be following the national trends and/or your home could have acquired equity before things cooled off, so even when nationwide trends indicate decreasing home values, you should understand that real estate is local.
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 difficult thing to know. As appraisers, it's our job to understand the market dynamics of our area. At Thomas W. Steinhart, we're experts at pinpointing value trends in Westfield, Hamilton County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will most often do away with the PMI with little effort. 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: