Let R.M. Conrad & Associates, Inc. help you determine if you can get rid of your PMI
A 20% down payment is usually the standard when buying a house. Considering the risk for the lender is often only the difference between the home value and the sum remaining on the loan, the 20% supplies a nice buffer against the charges of foreclosure, selling the home again, and natural value variationson the chance that a purchaser is unable to pay.
The market was accepting down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender endure the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This additional plan covers the lender if a borrower defaults on the loan and the worth of the home is lower than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and generally isn't even tax deductible, PMI can be costly to a borrower. Contradictory to a piggyback loan where the lender absorbs all the damages, PMI is money-making for the lender because they obtain the money, and they get the money if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homeowner prevent bearing the cost of PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Keen homeowners can get off the hook sooner than expected. The law guarantees that, upon request of the home owner, the PMI must be released when the principal amount reaches only 80 percent.
It can take many years to arrive at the point where the principal is just 20% of the original loan amount, so it's necessary to know how your home has increased in value. After all, every bit of appreciation you've gained over the years counts towards removing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood might not be minding the national trends and/or your home could have secured equity before things simmered down, so even when nationwide trends hint at falling home values, you should understand that real estate is local.
The difficult 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 definitely help. It's an appraiser's job to understand the market dynamics of their area. At R.M. Conrad & Associates, Inc., we know when property values have risen or declined. We're experts at analyzing value trends in West Chester, Chester County and surrounding areas. Faced with information from an appraiser, the mortgage company will most often cancel the PMI with little effort. At that time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: