Let A & B Tax Service help you determine if you can cancel your PMI
A 20% down payment is typically the standard when purchasing a home. Considering the liability for the lender is usually only the remainder between the home value and the sum due on the loan, the 20% adds a nice buffer against the charges of foreclosure, selling the home again, and natural value changesin the event a purchaser is unable to pay.
Banks were accepting down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender manage the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This supplemental policy guards the lender in the event a borrower is unable to pay on the loan and the market price of the house is less than the loan balance.
PMI is pricey 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. Opposite from a piggyback loan where the lender takes in all the costs, PMI is lucrative 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 home buyer refrain from bearing the expense of PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Keen home owners can get off the hook a little early. The law guarantees that, upon request of the home owner, the PMI must be dropped when the principal amount equals just 80 percent.
It can take many years to get to the point where the principal is just 20% of the original amount borrowed, so it's crucial to know how your home has grown in value. After all, any appreciation you've acquired over time counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Despite the fact that nationwide trends predict declining home values, understand that real estate is local. Your neighborhood may not be minding the national trends and/or your home might have gained equity before things calmed down.
The toughest thing for most home owners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can certainly help. It's an appraiser's job to understand the market dynamics of their area. At A & B Tax Service, we know when property values have risen or declined. We're experts at identifying value trends in Sturtevant, Racine County and surrounding areas. Faced with information from an appraiser, the mortgage company will often do away with the PMI with little trouble. 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: