Let Fife Appraising help you discover if you can cancel your PMIWhen buying a house, a 20% down payment is usually the standard. Because the liability for the lender is generally only the difference between the home value and the amount remaining on the loan, the 20% provides a nice cushion against the costs of foreclosure, reselling the home, and regular value variations in the event a purchaser defaults.The market was taking down payments discounted to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. How does a lender manage the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This added plan takes care of the lender in the event a borrower doesn't pay on the loan and the value of the property is lower than what the borrower still owes on the loan. Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI can be pricey to a borrower. Instead of a piggyback loan where the lender absorbs all the costs, PMI is profitable for the lender because they obtain the money, and they are covered if the borrower is unable to pay.
How homeowners can prevent paying PMIThe Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law promises that, upon request of the home owner, the PMI must be released when the principal amount reaches just 80 percent. So, wise home owners can get off the hook ahead of time.Because it can take a significant number of years to arrive at the point where the principal is only 80% of the original amount of the loan, it's important to know how your Utah home has appreciated in value. After all, every bit of appreciation you've accomplished over the years counts towards dismissing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Even when nationwide trends forecast falling home values, understand that real estate is local. Your neighborhood may not be heeding the national trends and/or your home could have gained equity before things cooled off. The hardest thing for almost all people to figure out is just when their home's equity goes over the 20% point. A certified, Utah licensed real estate appraiser can certainly help. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Fife Appraising, we're masters at identifying value trends in Salt Lake City, Salt Lake County, and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will most often cancel the PMI with little anxiety. 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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