Let Crescent Appraisal Group, Inc. help you determine if you can get rid of your PMI
It's typically understood that a 20% down payment is the standard when getting a mortgage. Considering the liability for the lender is generally only the remainder between the home value and the sum due on the loan, the 20% supplies a nice cushion against the expenses of foreclosure, reselling the home, and natural value fluctuationson the chance that a borrower is unable to pay.
Banks were accepting down payments as low as 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. A lender is able to handle the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplemental plan guards the lender in case a borrower doesn't pay on the loan and the market price of the property is less than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI is costly to a borrower. It's money-making for the lender because they acquire the money, and they get paid if the borrower is unable to pay, unlike a piggyback loan where the lender consumes all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homeowners can refrain from paying PMI
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Wise homeowners can get off the hook a little earlier. The law designates that, upon request of the home owner, the PMI must be released when the principal amount equals just 80 percent.
Because it can take many years to get to the point where the principal is only 20% of the initial loan amount, it's important to know how your home has appreciated in value. After all, every bit of 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? Your neighborhood might not be adhering to the national trends and/or your home could have secured equity before things cooled off, so even when nationwide trends forecast decreasing home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. As appraisers, it's our job to know the market dynamics of our area. At Crescent Appraisal Group, Inc., we're experts at determining value trends in Metairie, Jefferson 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 often cancel 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: