Let Appraisal Express HI, LLC help you learn if you can eliminate your PMI
It's generally known that a 20% down payment is the standard when purchasing a home. Since 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 charges of foreclosure, reselling the home, and natural value variationsin the event a purchaser defaults.
The market was taking down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender handle the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI protects the lender if a borrower defaults on the loan and the market price of the house is less than the loan balance.
PMI can be pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and generally isn't even tax deductible. It's money-making for the lender because they obtain the money, and they receive payment if the borrower defaults, separate from a piggyback loan where the lender consumes all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home buyers prevent paying PMI?
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Wise homeowners can get off the hook beforehand. The law designates that, upon request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent.
Since it can take many years to arrive at the point where the principal is just 20% of the initial amount borrowed, it's necessary to know how your home has appreciated in value. After all, all of the appreciation you've accomplished over the years counts towards removing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood may not be reflecting the national trends and/or your home might have acquired equity before things settled down, so even when nationwide trends hint at decreasing home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help home owners 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 Appraisal Express HI, LLC, we're masters at determining value trends in Kihei, Maui County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will usually drop the PMI with little trouble. At that time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: