Let Las Vegas Appraisal Service, Inc. help you decide if you can cancel your PMI
When purchasing a home, a 20% down payment is usually the standard. Since the risk for the lender is often only the remainder between the home value and the amount due on the loan, the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and typical value changeson the chance that a purchaser is unable to pay.
Banks were taking down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI covers the lender if a borrower defaults on the loan and the market price of the property is less than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and many times isn't even tax deductible, PMI can be costly to a borrower. It's profitable for the lender because they collect the money, and they get the money if the borrower is unable to pay, separate from a piggyback loan where the lender takes in all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home buyers refrain from paying PMI?
The Homeowners Protection Act of 1998 requires 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. Savvy home owners can get off the hook beforehand. The law designates that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent.
Since it can take countless years to get to the point where the principal is only 20% of the original amount of the loan, it's crucial to know how your home has grown in value. After all, any appreciation you've acquired over time counts towards removing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Despite the fact that nationwide trends hint at plunging home values, understand that real estate is local. Your neighborhood might not be minding the national trends and/or your home may have secured equity before things settled down.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. It is an appraiser's job to know the market dynamics of their area. At Las Vegas Appraisal Service, Inc., we know when property values have risen or declined. We're experts at recognizing value trends in Las Vegas, Clark County and surrounding areas. Faced with figures from an appraiser, the mortgage company will usually cancel the PMI with little effort. 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: