Let R.M. Conrad & Associates, Inc. help you figure out if you can eliminate your PMI
A 20% down payment is usually the standard when purchasing a home. The lender's liability is usually only the remainder between the home value and the amount remaining on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and regular value fluctuations on the chance that a borrower doesn't pay.
The market was working with down payments down to 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. A lender is able to endure the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower is unable to pay on the loan and the worth of the house is less than what the borrower still owes on the loan.
PMI is pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and oftentimes isn't even tax deductible. Unlike a piggyback loan where the lender absorbs all the costs, PMI is advantageous for the lender because they acquire 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 a home buyer avoid bearing the cost of PMI?
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Savvy home owners can get off the hook a little early. The law designates 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 just 20% of the initial amount borrowed, so it's important to know how your home has increased in value. After all, all of the appreciation you've achieved over time counts towards removing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Despite the fact that nationwide trends signify falling home values, be aware that real estate is local. Your neighborhood might not be heeding the national trends and/or your home may have gained equity before things cooled off.
The hardest thing for many home owners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can surely help. It is an appraiser's job to know the market dynamics of their area. At R.M. Conrad & Associates, Inc., we're masters at analyzing value trends in West Chester, Chester County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will generally do away with the PMI with little anxiety. 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: