Let Hagan Real Estate, Inc. help you determine if you can eliminate your PMI
When purchasing a home, a 20% down payment is typically the standard. The lender's risk is oftentimes only the remainder between the home value and the amount due on the loan, so the 20% supplies a nice buffer against the charges of foreclosure, reselling the home, and natural value variations in the event a borrower doesn't pay.
The market was working with down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to endure the additional risk of the reduced down payment with 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 house is less than the balance of the loan.
PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and oftentimes isn't even tax deductible. It's favorable for the lender because they obtain the money, and they get paid if the borrower doesn't pay, different 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 can a homeowner avoid bearing the expense of PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Wise homeowners can get off the hook a little earlier. The law stipulates that, at the request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent.
It can take countless years to reach the point where the principal is just 20% of the initial loan amount, so it's necessary to know how your home has appreciated in value. After all, every bit of appreciation you've gained over time counts towards removing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% mark? Your neighborhood may not be adopting the national trends and/or your home might have secured equity before things settled down, so even when nationwide trends indicate plummeting home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At Hagan Real Estate, Inc., we're experts at determining value trends in Cullman, Cullman County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will generally cancel the PMI with little effort. At which 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: