Let Harper & Strickland, Inc. help you discover if you can cancel your PMI

A 20% down payment is typically the standard when buying a house. The lender's risk is oftentimes only the difference between the home value and the amount outstanding on the loan, so the 20% supplies a nice cushion against the expenses of foreclosure, reselling the home, and natural value fluctuations on the chance that a purchaser defaults.

During the recent mortgage upturn of the last decade, it was customary to see lenders requiring down payments of 10, 5 or often 0 percent. How does a lender handle the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This added policy takes care of the lender if a borrower doesn't pay on the loan and the market price of the property is less than what the borrower still owes on the loan.

PMI can be expensive to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and generally isn't even tax deductible. Opposite from a piggyback loan where the lender absorbs all the deficits, PMI is favorable for the lender because they acquire the money, and they get the money if the borrower is unable to pay.

Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.

How can a homebuyer prevent bearing the expense of PMI?

The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Wise home owners can get off the hook a little early. The law guarantees that, upon request of the homeowner, the PMI must be released when the principal amount equals just 80 percent.

Considering it can take many years to arrive at the point where the principal is only 20% of the original amount borrowed, it's crucial to know how your home has appreciated in value. After all, any appreciation you've obtained over the years counts towards removing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Despite the fact that nationwide trends predict declining home values, realize that real estate is local. Your neighborhood might not be heeding the national trends and/or your home might have acquired equity before things calmed down.

A certified, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. As appraisers, it's our job to know the market dynamics of our area. At Harper & Strickland, Inc., we know when property values have risen or declined. We're experts at recognizing value trends in Fairview, Collin County and surrounding areas. When faced with data from an appraiser, the mortgage company will usually remove the PMI with little anxiety. At which 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