Let Columbus Appraisal Company, LLC help you learn if you can cancel your PMI
It's widely known that a 20% down payment is common when purchasing a home. Considering the liability for the lender is generally only the difference between the home value and the amount due on the loan, the 20% supplies a nice cushion against the costs of foreclosure, selling the home again, and regular value fluctuationson the chance that a borrower doesn't pay.
The market was accepting down payments down to 10, 5 and even 0 percent during the mortgage boom of the last decade. How does a lender handle the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower defaults on the loan and the market price of the home is less than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible, PMI is pricey to a borrower. It's money-making for the lender because they collect the money, and they get paid if the borrower doesn't pay, contradictory to a piggyback loan where the lender consumes all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a buyer refrain from paying PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Savvy homeowners can get off the hook sooner than expected. The law designates that, upon request of the homeowner, 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 loan amount, so it's crucial to know how your home has appreciated in value. After all, all of the appreciation you've accomplished over the years counts towards removing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Your neighborhood might not be heeding the national trends and/or your home could have acquired equity before things calmed down, so even when nationwide trends indicate plummeting home values, you should realize that real estate is local.
The hardest thing for many homeowners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can definitely help. As appraisers, it's our job to understand the market dynamics of our area. At Columbus Appraisal Company, LLC, we're experts at analyzing value trends in Westerville, Franklin County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will generally eliminate the PMI with little effort. At that time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: