Let Milwaukee Appraisal Co./Stowe Appraisals help you determine if you can eliminate your PMI
It's typically known that a 20% down payment is common when buying a house. Since the risk for the lender is often only the remainder between the home value and the amount remaining on the loan, the 20% adds a nice cushion against the costs of foreclosure, reselling the home, and natural value variationsin the event a borrower defaults.
During the recent mortgage upturn of the last decade, it became widespread to see lenders commanding down payments of 10, 5 or even 0 percent. How does a lender handle the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplementary policy takes care of the lender in case a borrower is unable to pay on the loan and the worth of the property is lower than the balance of the loan.
PMI is pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible. It's advantageous for the lender because they acquire the money, and they get the money if the borrower doesn't pay, unlike a piggyback loan where the lender consumes all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home owners can keep from paying PMI
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law designates that, upon request of the home owner, the PMI must be dropped when the principal amount equals just 80 percent. So, smart homeowners can get off the hook a little early.
It can take many years to arrive at the point where the principal is just 20% of the original loan amount, so it's necessary to know how your home has increased in value. After all, any appreciation you've accomplished over the years counts towards removing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Your neighborhood might not be adopting the national trends and/or your home could have secured equity before things simmered down, so even when nationwide trends forecast falling home values, you should understand that real estate is local.
The toughest thing for most homeowners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. As appraisers, it's our job to understand the market dynamics of our area. At Milwaukee Appraisal Co./Stowe Appraisals, we know when property values have risen or declined. We're masters at pinpointing value trends in Franklin, Milwaukee County and surrounding areas. Faced with data from an appraiser, the mortgage company will generally drop the PMI with little trouble. At which time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: