McCanham & Associates, LLC can help you remove your Private Mortgage Insurance
It's generally understood that a 20% down payment is accepted when buying a house. Because the risk for the lender is oftentimes only the remainder between the home value and the sum outstanding on the loan, the 20% provides a nice cushion against the costs of foreclosure, selling the home again, and natural value variationson the chance that a purchaser defaults.
Banks were taking down payments as low as 10, 5 and even 0 percent during the mortgage boom of the last decade. A lender is able to endure the added risk of the low down payment with Private Mortgage Insurance or PMI. This added policy covers the lender in the event a borrower doesn't pay on the loan and the value of the house is less than the loan balance.
PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and generally isn't even tax deductible. Contradictory to a piggyback loan where the lender consumes all the costs, PMI is profitable for the lender because they obtain the money, and they get paid if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homeowners can avoid bearing the expense of PMI
The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically cancel 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 released when the principal amount equals only 80 percent. So, smart home owners can get off the hook ahead of time.
It can take countless years to reach the point where the principal is only 20% of the initial amount of the loan, so it's crucial to know how your home has increased in value. After all, all of the appreciation you've achieved over time counts towards dismissing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Your neighborhood may not be minding the national trends and/or your home might have secured equity before things simmered down, so even when nationwide trends forecast falling home values, you should realize that real estate is local.
The hardest thing for many homeowners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can surely help. As appraisers, it's our job to keep up with the market dynamics of our area. At McCanham & Associates, LLC, we know when property values have risen or declined. We're experts at pinpointing value trends in Dallas, Paulding County and surrounding areas. Faced with information from an appraiser, the mortgage company will most often remove the PMI with little trouble. At that 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: