Let The August Group Inc. help you discover if you can eliminate your PMI
A 20% down payment is typically accepted when purchasing a home. Because the risk for the lender is usually only the difference between the home value and the amount remaining on the loan, the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and typical value variationsin the event a borrower defaults.
The market was working with down payments down to 10, 5 and even 0 percent during the mortgage boom of the last decade. How does a lender manage the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower doesn't pay on the loan and the worth of the home is lower than the loan balance.
PMI is pricey to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and generally isn't even tax deductible. It's favorable for the lender because they acquire the money, and they get the money if the borrower doesn't pay, separate from a piggyback loan where the lender takes in all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homebuyer refrain from bearing the cost of PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law designates that, at the request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent. So, smart homeowners can get off the hook a little early.
Because it can take many years to reach the point where the principal is only 20% of the initial amount of the loan, it's necessary to know how your home has appreciated in value. After all, every bit of appreciation you've gained over the years counts towards dismissing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Despite the fact that nationwide trends forecast plunging home values, be aware that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home could have secured equity before things simmered down.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. As appraisers, it's our job to understand the market dynamics of our area. At The August Group Inc., we know when property values have risen or declined. We're masters at pinpointing value trends in St Louis, Saint Louis County and surrounding areas. When faced with figures from an appraiser, the mortgage company will usually drop the PMI with little trouble. At that time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link:
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