Let KEY INSIGHT help you determine if you can cancel your PMI
A 20% down payment is typically accepted when getting a mortgage. Considering the liability for the lender is generally only the difference between the home value and the sum due on the loan, the 20% provides a nice cushion against the costs of foreclosure, reselling the home, and natural value variationson the chance that a borrower is unable to pay.
Banks were working with down payments down to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. How does a lender endure the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplemental plan takes care of the lender in case a borrower is unable to pay on the loan and the worth of the home is lower than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI can be expensive to a borrower. Contradictory to a piggyback loan where the lender absorbs all the deficits, PMI is lucrative for the lender because they collect the money, and they receive payment if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homeowners keep from paying PMI?
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Savvy home owners can get off the hook a little earlier. The law guarantees that, at the request of the home owner, the PMI must be abandoned 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 initial loan amount, so it's crucial to know how your home has appreciated in value. After all, any appreciation you've gained over the years counts towards removing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% threshold? Your neighborhood might not be adhering to the national trends and/or your home might have gained equity before things simmered down, so even when nationwide trends forecast plummeting home values, you should realize that real estate is local.
The hardest thing for many home owners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. 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 analyzing value trends in Rhinelander, Oneida County and surrounding areas. When faced with figures from an appraiser, the mortgage company will most often eliminate the PMI with little trouble. At which time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: