Let Elite Appraisals (215) 431-6123 help you learn if you can cancel your PMIA 20% down payment is usually accepted when purchasing a home. Because the liability for the lender is oftentimes only the difference between the home value and the amount outstanding on the loan, the 20% provides a nice buffer against the expenses of foreclosure, reselling the home, and regular value fluctuations in the event a purchaser doesn't pay.Lenders were taking down payments discounted to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender manage the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This supplementary policy protects the lender in case a borrower defaults on the loan and the market price of the property is lower than what the borrower still owes on the loan. PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and on many occasions isn't even tax deductible. Instead of a piggyback loan where the lender absorbs all the losses, PMI is money-making for the lender because they acquire the money, and they receive payment if the borrower doesn't pay.
How can homeowners avoid paying PMI?The Homeowners Protection Act of 1998 forces the lenders on the majority of loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law guarantees that, at the request of the home owner, the PMI must be released when the principal amount reaches just 80 percent. So, smart homeowners can get off the hook a little early.Because it can take a significant number of years to arrive at the point where the principal is only 80% of the initial amount of the loan, it's essential to know how your Pennsylvania home has increased in value. After all, all of the appreciation you've gained over the years counts towards removing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood might not conform to national trends and/or your home could have acquired equity before things simmered down. So even when nationwide trends indicate declining home values, you should realize that real estate is local. An accredited, Pennsylvania licensed real estate appraiser can help homeowners figure out if their equity has reached the 20% point, as it's a tough thing to know. It's an appraiser's job to recognize the market dynamics of their area. At Elite Appraisals (215) 431-6123, we're experts at analyzing value trends in Sellersville, Bucks County, and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will generally cancel the PMI with little trouble. At that time, the home owner can relish 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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