Let The August Group Inc. help you learn if you can get rid of your PMI
A 20% down payment is typically accepted when getting a mortgage. The lender's risk is oftentimes only the remainder between the home value and the sum due on the loan, so the 20% supplies a nice cushion against the costs of foreclosure, reselling the home, and natural value changes on the chance that a purchaser is unable to pay.
During the recent mortgage boom of the last decade, it became customary to see lenders taking down payments of 10, 5 or often 0 percent. A lender is able to endure the added risk of the low down payment with Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower doesn't pay on the loan and the worth of the property is less than the balance of the loan.
PMI is pricey to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and frequently isn't even tax deductible. It's favorable for the lender because they acquire the money, and they receive payment if the borrower doesn't 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 homeowner avoid bearing the cost of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Acute homeowners can get off the hook a little earlier. The law stipulates that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent.
It can take many years to arrive at the point where the principal is only 20% of the initial loan amount, so it's important to know how your home has increased in value. After all, any appreciation you've acquired over time counts towards dismissing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Your neighborhood might not be minding the national trends and/or your home may have gained equity before things settled down, so even when nationwide trends indicate decreasing home values, you should realize that real estate is local.
The toughest thing for most homeowners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can surely help. As appraisers, it's our job to keep up with the market dynamics of our area. At The August Group Inc., we know when property values have risen or declined. We're experts at determining value trends in St Louis, Saint Louis County and surrounding areas. Faced with data from an appraiser, the mortgage company will generally cancel the PMI with little effort. At which 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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