Let Penfold & Associates Appraisal Service help you discover if you can cancel your PMIWhen buying a house, a 20% down payment is typically the standard. The lender's risk is generally only the difference between the home value and the balance remaining on the loan, so the 20% adds a nice cushion against the expenses of foreclosure, reselling the home, and natural value variations in the event a purchaser is unable to pay.The market was taking down payments as low as 10, 5 and frequently 0 percent in the peak of last decade's mortgage boom. How does a lender handle the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI protects the lender in the event a borrower doesn't pay on the loan and the market price of the property is less than what the borrower still owes on the loan. PMI can be expensive to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and many times isn't even tax deductible. Separate from a piggyback loan where the lender absorbs all the deficits, PMI is money-making for the lender because they obtain the money, and they get paid if the borrower defaults.
How can home owners prevent bearing the expense of PMI?The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Acute home owners can get off the hook a little early. The law pledges that, at the request of the home owner, the PMI must be released when the principal amount equals only 80 percent.Since it can take a significant number of years to get to the point where the principal is just 80% of the original amount of the loan, it's important to know how your Michigan home has increased in value. After all, any appreciation you've acquired over time counts towards dismissing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Even when nationwide trends forecast lower overall home values, understand that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home might have secured equity before things cooled off. A certified, Michigan licensed real estate appraiser can help homeowners figure out if their equity has reached the 20% point, as it's a hard thing to know. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Penfold & Associates Appraisal Service, we know when property values have risen or declined. We're masters at pinpointing value trends in Ellsworth, Antrim County, and surrounding areas. Faced with figures from an appraiser, the mortgage company will often remove the PMI with little trouble. At that 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: Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year
|
||||||||||||||||||
