Let Cynthia Wood Real Estate Appraiser help you learn if you can eliminate your PMI
A 20% down payment is typically the standard when purchasing a home. The lender's liability is generally only the difference between the home value and the amount due on the loan, so the 20% supplies a nice buffer against the expenses of foreclosure, reselling the home, and typical value variations in the event a borrower defaults.
During the recent mortgage upturn of the last decade, it was customary to see lenders commanding down payments of 10, 5 or often 0 percent. A lender is able to endure the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower defaults on the loan and the worth of the property is lower than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and often isn't even tax deductible, PMI is pricey to a borrower. It's money-making for the lender because they acquire the money, and they receive payment if the borrower defaults, different from a piggyback loan where the lender consumes all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homebuyers can keep from bearing the expense of PMI
The Homeowners Protection Act of 1998 requires 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. Keen home owners can get off the hook a little earlier. The law promises that, at the request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent.
Since it can take countless years to arrive at the point where the principal is only 20% of the original amount of the loan, it's necessary to know how your home has grown in value. After all, any appreciation you've obtained over time counts towards removing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Even when nationwide trends indicate falling home values, be aware that real estate is local. Your neighborhood might not be heeding the national trends and/or your home might have acquired equity before things cooled off.
The toughest thing for almost all home owners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. It's an appraiser's job to keep up with the market dynamics of their area. At Cynthia Wood Real Estate Appraiser, we know when property values have risen or declined. We're experts at recognizing value trends in Myrtle Beach, Horry County and surrounding areas. When faced with data from an appraiser, the mortgage company will usually drop the PMI with little trouble. At which time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: