Let Glynn Michael Appraisals LLC help you figure out if you can cancel your PMIA 20% down payment is usually the standard when getting a mortgage. Considering the liability for the lender is generally only the difference between the home value and the sum due on the loan, the 20% provides a nice buffer against the expenses of foreclosure, selling the home again, and regular value variations on the chance that a borrower is unable to pay.
During the recent mortgage upturn of the last decade, it was common to see lenders making deals with down payments of 10, 5 or often 0 percent. A lender is able to manage the additional risk of the small down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower defaults on the loan and the market price of the home is less than what is owed 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 on many occasions isn't even tax deductible. As opposed to a piggyback loan where the lender takes in all the losses, PMI is beneficial for the lender because they collect the money, and they receive payment if the borrower is unable to pay.
How can a home owner refrain from bearing the expense of PMI?The Homeowners Protection Act of 1998 forces the lenders on the majority of loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Smart homeowners can get off the hook beforehand. The law promises that, upon request of the home owner, the PMI must be released when the principal amount reaches just 80 percent.
Considering it can take several years to reach the point where the principal is just 80% of the original amount borrowed, it's crucial to know how your Louisiana home has appreciated in value. After all, every bit of appreciation you've accomplished over time counts towards abolishing PMI. So why pay it after your loan balance has dropped below the 80% mark? Your neighborhood might not adhere to national trends and/or your home might have acquired equity before things cooled off. So even when nationwide trends forecast declining home values, you should know most importantly that real estate is local.
The toughest thing for almost all homeowners to determine is just when their home's equity rises above the 20% point. An accredited, Louisiana licensed real estate appraiser can surely help. It's an appraiser's job to keep up with the market dynamics of their area. At Glynn Michael Appraisals LLC, we know when property values have risen or declined. We're experts at determining value trends in Houma, Terrebonne County, and surrounding areas. Faced with information from an appraiser, the mortgage company will often cancel the PMI with little effort. 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:
Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year