Let Absolute Appraisal Services, LLC help you determine if you can cancel your PMI
A 20% down payment is usually accepted when buying a house. The lender's liability is usually 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, selling the home again, and regular value fluctuations on the chance that a purchaser doesn't pay.
During the recent mortgage upturn of the last decade, it was common to see lenders commanding down payments of 10, 5 or often 0 percent. How does a lender endure the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplementary plan covers the lender in the event a borrower doesn't pay on the loan and the value of the home is less than the loan balance.
PMI is costly to a borrower on the grounds that 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 beneficial for the lender because they acquire the money, and they get paid if the borrower doesn't pay, opposite from a piggyback loan where the lender takes in all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home buyer prevent bearing the cost of PMI?
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law promises that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent. So, acute homeowners can get off the hook a little earlier.
Since it can take countless years to get to the point where the principal is only 20% of the initial loan amount, it's crucial to know how your home has increased in value. After all, all of the appreciation you've obtained over time counts towards dismissing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood may not be adopting the national trends and/or your home may have secured equity before things cooled off, so even when nationwide trends indicate plunging home values, you should realize that real estate is local.
The hardest thing for many home owners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can definitely help. It is an appraiser's job to understand the market dynamics of their area. At Absolute Appraisal Services, LLC, we're masters at identifying value trends in Myrtle Beach, Horry County and surrounding areas, and we know when property values have risen or declined. When faced with information 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: