Let The August Group Inc. help you figure out if you can get rid of your PMI
When getting a mortgage, a 20% down payment is typically the standard. Considering the liability for the lender is usually only the remainder between the home value and the amount due on the loan, the 20% adds a nice cushion against the charges of foreclosure, reselling the home, and typical value fluctuationsin the event a purchaser doesn't pay.
Lenders were accepting down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender handle the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI guards the lender if a borrower is unable to pay on the loan and the market price of the property is lower than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and generally isn't even tax deductible, PMI can be costly to a borrower. It's favorable for the lender because they acquire the money, and they receive payment if the borrower defaults, opposite from a piggyback loan where the lender absorbs all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How buyers can refrain from bearing the cost of PMI
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law states that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, acute homeowners can get off the hook a little earlier.
Considering it can take many years to get to the point where the principal is only 20% of the original amount of the loan, it's essential to know how your home has increased in value. After all, any appreciation you've accomplished over time counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Your neighborhood might not be following the national trends and/or your home might have gained equity before things simmered down, so even when nationwide trends forecast declining home values, you should realize that real estate is local.
The hardest thing for almost all homeowners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can surely help. It is an appraiser's job to recognize the market dynamics of their area. At The August Group Inc., we know when property values have risen or declined. We're masters at analyzing value trends in St Louis, Saint Louis County and surrounding areas. Faced with figures from an appraiser, the mortgage company will most often cancel the PMI with little anxiety. At that time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link:
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