Let Schnoor Real Estate Services, Inc. help you determine if you can eliminate your PMI
When buying a house, a 20% down payment is usually the standard. Because the risk for the lender is oftentimes only the difference between the home value and the sum due on the loan, the 20% supplies a nice buffer against the charges of foreclosure, selling the home again, and typical value fluctuationson the chance that a purchaser doesn't pay.
During the recent mortgage upturn of the mid 2000s, it became common to see lenders taking down payments of 10, 5 or often 0 percent. A lender is able to endure the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower is unable to pay on the loan and the worth of the house is less than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and frequently isn't even tax deductible, PMI is costly to a borrower. It's favorable for the lender because they secure the money, and they get the money if the borrower defaults, unlike a piggyback loan where the lender consumes all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home buyers can prevent bearing the expense 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 reaches 78 percent of the primary loan amount. Acute homeowners can get off the hook a little earlier. The law pledges that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent.
It can take countless years to get to the point where the principal is only 20% of the initial amount borrowed, so it's essential to know how your home has increased in value. After all, any appreciation you've acquired over the years counts towards dismissing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Your neighborhood might not be following the national trends and/or your home may have secured equity before things simmered down, so even when nationwide trends indicate plunging 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 hard thing to know. As appraisers, it's our job to understand the market dynamics of our area. At Schnoor Real Estate Services, Inc., we're experts at identifying value trends in Fair Haven, Saint Clair County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will generally drop the PMI with little trouble. 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: