Let Blue Water Appraisals help you determine if you can get rid of your PMI
A 20% down payment is usually the standard when getting a mortgage. The lender's risk is often only the difference between the home value and the sum outstanding on the loan, so the 20% provides a nice cushion against the charges of foreclosure, reselling the home, and natural value variations in the event a purchaser defaults.
During the recent mortgage boom of the last decade, it was widespread to see lenders commanding down payments of 10, 5 or often 0 percent. How does a lender handle the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower doesn't pay on the loan and the market price of the house is lower than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and often isn't even tax deductible, PMI can be pricey to a borrower. It's profitable for the lender because they collect the money, and they receive payment if the borrower doesn't pay, separate from a piggyback loan where the lender consumes all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home owner avoid paying PMI?
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically eliminate 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 designates that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent.
It can take countless years to arrive at the point where the principal is only 20% of the original amount borrowed, so it's necessary to know how your home has grown in value. After all, any appreciation you've achieved over the years counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends hint at declining home values, realize that real estate is local. Your neighborhood may not be minding the national trends and/or your home may have secured equity before things simmered down.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. It's an appraiser's job to keep up with the market dynamics of their area. At Blue Water Appraisals, we're masters at recognizing value trends in Cape Coral, Lee 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 often remove the PMI with little effort. At which 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: