Let The August Group Inc. help you figure out if you can get rid of your PMI
A 20% down payment is typically accepted when buying a house. Considering the risk for the lender is often only the difference between the home value and the sum outstanding on the loan, the 20% adds a nice buffer against the expenses of foreclosure, reselling the home, and natural value fluctuationson the chance that a purchaser defaults.
Banks were accepting down payments down to 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender endure the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower defaults on the loan and the worth of the house is less than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and often isn't even tax deductible, PMI can be costly to a borrower. Different from a piggyback loan where the lender takes in all the deficits, PMI is advantageous for the lender because they acquire the money, and they receive payment if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homeowners keep from paying PMI?
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically stop the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law designates that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, keen home owners can get off the hook ahead of time.
Because it can take many years to reach the point where the principal is just 20% of the original amount borrowed, it's essential to know how your home has increased in value. After all, any appreciation you've achieved over the years counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% mark? Your neighborhood might not be reflecting the national trends and/or your home might have gained equity before things cooled off, so even when nationwide trends indicate decreasing home values, you should realize that real estate is local.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a tough thing to know. As appraisers, it's our job to understand the market dynamics of our area. At The August Group Inc., we know when property values have risen or declined. We're experts at recognizing value trends in St Louis, Saint Louis County and surrounding areas. When faced with data from an appraiser, the mortgage company will often 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:
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