Let TSH Real Estate and Appraisal Services, LLC help you learn if you can eliminate your PMI
When buying a house, a 20% down payment is usually the standard. Because the liability for the lender is generally only the remainder between the home value and the amount due on the loan, the 20% provides a nice buffer against the expenses of foreclosure, reselling the home, and regular value variationsin the event a purchaser is unable to 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 manage the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplemental plan guards the lender in case a borrower is unable to pay on the loan and the value of the house is less than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and often isn't even tax deductible, PMI is pricey to a borrower. It's beneficial for the lender because they secure the money, and they get paid if the borrower doesn't pay, different from a piggyback loan where the lender takes in 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 homebuyer keep from paying PMI?
With the utilization 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 original loan amount. Savvy homeowners can get off the hook a little earlier. The law stipulates that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent.
Considering it can take many years to get to the point where the principal is only 20% of the original amount borrowed, it's necessary to know how your home has increased in value. After all, all of the appreciation you've gained over the years counts towards dismissing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not be following the national trends and/or your home could have acquired equity before things cooled off, so even when nationwide trends hint at decreasing home values, you should understand 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 tough thing to know. It's an appraiser's job to know the market dynamics of their area. At TSH Real Estate and Appraisal Services, LLC, we're experts at determining value trends in Kaneohe, Honolulu County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will most often cancel the PMI with little anxiety. 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: