Let Appraisal Express HI, LLC help you learn if you can get rid of your PMI
When getting a mortgage, a 20% down payment is typically the standard. Considering the liability for the lender is usually only the remainder between the home value and the sum outstanding on the loan, the 20% supplies a nice buffer against the costs of foreclosure, reselling the home, and regular value fluctuationson the chance that a purchaser doesn't pay.
The market was taking 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 additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower defaults on the loan and the value of the house is lower than the loan balance.
PMI is pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and oftentimes isn't even tax deductible. It's beneficial for the lender because they collect the money, and they get paid if the borrower defaults, separate from a piggyback loan where the lender absorbs all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home owners keep from bearing the cost of PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically cease the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Wise home owners can get off the hook ahead of time. The law stipulates that, at the request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent.
It can take countless years to reach the point where the principal is only 20% of the original amount of the loan, so it's important to know how your home has appreciated in value. After all, all of the appreciation you've acquired over the years counts towards dismissing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Despite the fact that nationwide trends indicate plunging home values, be aware that real estate is local. Your neighborhood may not be following the national trends and/or your home might have acquired equity before things simmered down.
The difficult thing for most homeowners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can surely help. It's an appraiser's job to keep up with the market dynamics of their area. At Appraisal Express HI, LLC, we know when property values have risen or declined. We're experts at identifying value trends in Kihei, Maui County and surrounding areas. Faced with data from an appraiser, the mortgage company will usually eliminate the PMI with little effort. At which time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: