Let KEY INSIGHT help you decide if you can eliminate your PMI
When buying a house, a 20% down payment is typically the standard. Since the risk for the lender is usually only the remainder between the home value and the amount due on the loan, the 20% provides a nice buffer against the costs of foreclosure, reselling the home, and regular value changeson the chance that a borrower defaults.
Lenders were working with down payments down to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. How does a lender handle the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI protects the lender if a borrower is unable to pay on the loan and the worth of the house is lower than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and frequently isn't even tax deductible, PMI is pricey to a borrower. Different from a piggyback loan where the lender takes in all the losses, PMI is beneficial for the lender because they secure the money, and they receive payment 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 homeowner prevent bearing the expense of PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law guarantees that, upon request of the home owner, the PMI must be released when the principal amount equals only 80 percent. So, keen 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 initial amount of the loan, so it's crucial to know how your home has increased in value. After all, all of the appreciation you've gained over time counts towards removing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% threshold? Your neighborhood might not be following the national trends and/or your home might have acquired equity before things cooled off, so even when nationwide trends signify declining home values, you should understand that real estate is local.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. As appraisers, it's our job to understand the market dynamics of our area. At KEY INSIGHT, we know when property values have risen or declined. We're masters at analyzing value trends in Rhinelander, Oneida County and surrounding areas. When faced with information from an appraiser, the mortgage company will often eliminate the PMI with little anxiety. At which time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: