Let The August Group Inc. help you figure out if you can cancel your PMI
It's largely understood that a 20% down payment is the standard when getting a mortgage. The lender's liability is often only the difference between the home value and the amount due on the loan, so the 20% adds a nice cushion against the expenses of foreclosure, selling the home again, and natural value changes in the event a purchaser doesn't pay.
During the recent mortgage upturn of the mid 2000s, it became customary to see lenders commanding down payments of 10, 5 or sometimes 0 percent. A lender is able to handle the added risk of the minimal down payment with Private Mortgage Insurance or PMI. This added plan guards the lender if a borrower doesn't pay on the loan and the market price of the house is less than the loan balance.
PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and many times isn't even tax deductible. It's lucrative for the lender because they acquire the money, and they get the money if the borrower is unable to pay, different from a piggyback loan where the lender takes in 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 refrain from paying PMI?
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Wise home owners can get off the hook beforehand. The law pledges that, upon request of the homeowner, the PMI must be released when the principal amount equals only 80 percent.
Because it can take many years to reach the point where the principal is just 20% of the original amount borrowed, it's crucial to know how your home has increased in value. After all, any appreciation you've accomplished over the years counts towards abolishing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Your neighborhood may not be minding the national trends and/or your home might have acquired equity before things calmed down, so even when nationwide trends predict plunging home values, you should understand that real estate is local.
The difficult thing for almost all home owners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can certainly help. As appraisers, it's our job to recognize the market dynamics of our area. At The August Group Inc., we know when property values have risen or declined. We're experts at analyzing value trends in St Louis, Saint Louis County and surrounding areas. Faced with information from an appraiser, the mortgage company will usually eliminate the PMI with little trouble. At which time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link:
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