Let KEY INSIGHT help you determine if you can get rid of your PMI
It's largely understood that a 20% down payment is common when purchasing a home. The lender's risk is generally only the difference between the home value and the sum outstanding on the loan, so the 20% adds a nice cushion against the expenses of foreclosure, selling the home again, and natural value changes on the chance that a purchaser defaults.
The market was working with 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 additional risk of the small down payment with Private Mortgage Insurance or PMI. PMI protects the lender in the event a borrower is unable to pay on the loan and the worth of the property is lower than what is owed on the loan.
PMI can be expensive to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and generally isn't even tax deductible. Unlike a piggyback loan where the lender takes in all the deficits, PMI is beneficial for the lender because they collect the money, and they get the money if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home buyers keep from bearing the expense of PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically cease the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law guarantees that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, smart homeowners can get off the hook a little earlier.
It can take countless years to get to the point where the principal is only 20% of the initial amount borrowed, so it's necessary to know how your home has grown in value. After all, any appreciation you've accomplished over time counts towards removing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Your neighborhood may not be minding the national trends and/or your home may have acquired equity before things cooled off, so even when nationwide trends indicate plunging home values, you should realize that real estate is local.
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 know the market dynamics of our area. At KEY INSIGHT, we know when property values have risen or declined. We're experts at pinpointing value trends in Rhinelander, Oneida County and surrounding areas. 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 delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: