Let Antietam Appraisals help you discover if you can cancel your PMIIt's generally understood that a 20% down payment is accepted when buying a house. Considering the risk for the lender is usually only the remainder between the home value and the sum remaining on the loan, the 20% supplies a nice buffer against the expenses of foreclosure, reselling the home, and regular value fluctuations on the chance that a borrower doesn't pay.During the recent mortgage upturn of the last decade, it became customary to see lenders reducing down payments to 10, 5 or sometimes 0 percent. How does a lender endure the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This additional policy takes care of the lender in case a borrower doesn't pay on the loan and the market price of the home is lower than what is owed on the loan. Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and many times isn't even tax deductible, PMI is pricey to a borrower. It's beneficial for the lender because they acquire the money, and they receive payment if the borrower doesn't pay, as opposed to a piggyback loan where the lender takes in all the damages.
How can home owners refrain from paying PMI?As a result of The Homeowners Protection Act of 1998, lenders are required to automatically stop the PMI when the principal balance of the loan equals 78 percent of the initial loan amount on most loans. Wise home owners can get off the hook sooner than expected. The law promises that, upon request of the homeowner, the PMI must be released when the principal amount equals just 80 percent.Because it can take several years to get to the point where the principal is only 80% of the original loan amount, it's necessary to know how your Maryland home has appreciated in value. After all, all of the appreciation you've achieved over time counts towards dismissing PMI. So why pay it after your loan balance has dropped below the 80% mark? Even when nationwide trends indicate falling home values, understand that real estate is local. Your neighborhood may not be following the national trends and/or your home might have secured equity before things declined. The difficult thing for almost all homeowners to determine is whether their home equity has exceeded the 20% point. An accredited, Maryland licensed real estate appraiser can definitely help. It's an appraiser's job to understand the market dynamics of their area. At Antietam Appraisals, we're experts at determining value trends in Hagerstown, Washington County, and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will usually cancel the PMI with little anxiety. At which time, the homeowner can retain 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
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