Let Vinson Real Estate Services, LLC help you learn if you can eliminate your PMI
It's generally inferred that a 20% down payment is the standard when buying a house. The lender's risk is usually only the difference between the home value and the sum outstanding on the loan, so the 20% supplies a nice cushion against the expenses of foreclosure, reselling the home, and natural value variations on the chance that a borrower is unable to pay.
The market was accepting down payments down to 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender manage the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This added policy guards the lender if a borrower is unable to pay on the loan and the worth of the house is less than what is owed on the loan.
PMI can be costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and generally isn't even tax deductible. Unlike a piggyback loan where the lender takes in all the losses, PMI is favorable for the lender because they secure the money, and they get the money if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home buyers can avoid paying PMI
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Savvy home owners can get off the hook ahead of time. The law designates that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent.
Considering it can take countless years to reach the point where the principal is only 20% of the original amount of the loan, it's important to know how your home has increased in value. After all, any appreciation you've gained over time counts towards removing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood might not be adhering to the national trends and/or your home might have secured equity before things simmered down, so even when nationwide trends forecast declining home values, you should understand that real estate is local.
The toughest thing for many homeowners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can certainly help. It is an appraiser's job to know the market dynamics of their area. At Vinson Real Estate Services, LLC, we know when property values have risen or declined. We're experts at recognizing value trends in Rockville, Montgomery County and surrounding areas. When faced with information from an appraiser, the mortgage company will most often remove the PMI with little trouble. At that time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: