Let Sharon L. Bagby & Assoc. your Crystal Lake Appraisal Service help you discover if you can get rid of your PMI
When buying a house, a 20% down payment is usually the standard. Because the risk for the lender is usually only the remainder between the home value and the amount outstanding on the loan, the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and natural value changesin the event a borrower defaults.
The market was accepting down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender manage the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplemental plan takes care of the lender if a borrower doesn't pay on the loan and the worth of the home is lower than what is owed on the loan.
PMI can be pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and generally 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 refrain from paying PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Smart home owners can get off the hook ahead of time. The law designates that, at the request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent.
Because it can take many years to reach the point where the principal is only 20% of the original amount of the loan, it's important to know how your home has increased in value. After all, any appreciation you've obtained over the years counts towards abolishing PMI. So why pay it after your loan balance has dropped below the 80% mark? Even when nationwide trends indicate plunging home values, realize that real estate is local. Your neighborhood might not be following the national trends and/or your home could have gained equity before things calmed down.
The difficult thing for most 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 Bagby & Assoc. your Crystal Lake Appraisal Service, we're masters at pinpointing value trends in Crystal Lake, McHenry County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will most often do away with the PMI with little trouble. At which time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: