Let REID E. CHOATE & ASSOCIATES, LLC help you determine if you can get rid of your PMI
It's largely known that a 20% down payment is the standard when getting a mortgage. Considering the liability for the lender is usually only the remainder between the home value and the sum remaining on the loan, the 20% supplies a nice cushion against the costs of foreclosure, selling the home again, and natural value variationson the chance that a borrower defaults.
The market was accepting down payments as low as 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. A lender is able to manage the increased risk of the low down payment with Private Mortgage Insurance or PMI. PMI guards the lender if a borrower is unable to pay on the loan and the worth of the home is lower than the loan balance.
PMI can be costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and generally isn't even tax deductible. Contradictory to a piggyback loan where the lender consumes all the deficits, PMI is advantageous for the lender because they secure the money, and they get paid 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 homeowners can avoid bearing the cost of PMI
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Keen home owners can get off the hook a little earlier. The law pledges that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent.
Considering it can take many years to get to the point where the principal is just 20% of the initial amount of the loan, it's important to know how your home has appreciated in value. After all, any appreciation you've achieved over time counts towards removing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not be heeding the national trends and/or your home might have gained equity before things cooled off, so even when nationwide trends signify decreasing home values, you should realize that real estate is local.
The hardest thing for most home owners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can certainly help. It is an appraiser's job to know the market dynamics of their area. At REID E. CHOATE & ASSOCIATES, LLC, we know when property values have risen or declined. We're experts at recognizing value trends in Pahoa, Hawaii County and surrounding areas. Faced with data from an appraiser, the mortgage company will generally drop the PMI with little effort. At which time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: