Let The August Group Inc. help you discover if you can eliminate your PMI
It's generally known that a 20% down payment is common when getting a mortgage. The lender's risk is often only the remainder between the home value and the amount remaining on the loan, so the 20% provides a nice buffer against the expenses of foreclosure, reselling the home, and typical value fluctuations on the chance that a purchaser defaults.
During the recent mortgage boom of the mid 2000s, it was customary to see lenders commanding down payments of 10, 5 or even 0 percent. A lender is able to manage the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower defaults on the loan and the market price of the house is lower than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and many times isn't even tax deductible, PMI is pricey to a borrower. Unlike a piggyback loan where the lender takes in all the deficits, PMI is beneficial for the lender because they obtain the money, and they get the money 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 can a homebuyer keep from paying PMI?
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law guarantees that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent. So, acute home owners can get off the hook a little early.
It can take countless years to get to the point where the principal is just 20% of the original amount of the loan, so it's necessary to know how your home has appreciated in value. After all, all of the appreciation you've gained over the years counts towards abolishing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Your neighborhood might not be adopting the national trends and/or your home might have gained equity before things cooled off, so even when nationwide trends indicate falling home values, you should realize that real estate is local.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. As appraisers, it's our job to know the market dynamics of our area. At The August Group Inc., we're experts at analyzing value trends in St Louis, Saint Louis County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will usually remove the PMI with little anxiety. At which time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link:
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