Let MaxAppraisals, LLC help you determine if you can cancel your PMI
It's largely known that a 20% down payment is accepted when purchasing a home. The lender's risk is often only the remainder between the home value and the sum remaining on the loan, so the 20% provides a nice buffer against the costs of foreclosure, reselling the home, and regular value fluctuations on the chance that a borrower is unable to pay.
During the recent mortgage boom of the mid 2000s, it was common to see lenders commanding down payments of 10, 5 or often 0 percent. A lender is able to handle the additional risk of the low down payment with Private Mortgage Insurance or PMI. This additional plan covers the lender in the event a borrower is unable to pay on the loan and the worth of the home is less than the balance of the loan.
PMI can be costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and frequently isn't even tax deductible. It's advantageous for the lender because they obtain the money, and they receive payment if the borrower defaults, different from a piggyback loan where the lender takes in all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homeowners can 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 equals 78 percent of the initial loan amount. The law states that, at the request of the home owner, the PMI must be released when the principal amount equals just 80 percent. So, savvy homeowners can get off the hook sooner than expected.
It can take many years to get to the point where the principal is only 20% of the initial loan amount, so it's necessary to know how your home has increased in value. After all, every bit of appreciation you've obtained over time 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 signify plummeting home values, understand that real estate is local. Your neighborhood might not be following the national trends and/or your home might have gained equity before things calmed down.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At MaxAppraisals, LLC, we're masters at identifying value trends in Richmond, Richmond City 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 eliminate the PMI with little effort. At which time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: