Let Canter Fields Real Estate, LLC help you discover if you can cancel your PMIWhen purchasing a home, a 20% down payment is usually the standard. The lender's liability is oftentimes only the remainder between the home value and the amount due on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, selling the home again, and regular value changes on the chance that a borrower doesn't pay.Lenders were taking down payments dropping to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender handle the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower doesn't pay on the loan and the value of the house is less than what is owed on the loan. Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and on many occasions isn't even tax deductible, PMI can be expensive to a borrower. Instead of a piggyback loan where the lender consumes all the costs, PMI is advantageous for the lender because they obtain the money, and they receive payment if the borrower defaults.
How can a home buyer refrain from paying PMI?With the implementation of The Homeowners Protection Act of 1998, lenders are required to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount on most loans. The law stipulates that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent. So, smart home owners can get off the hook a little early.Considering it can take several years to reach the point where the principal is just 80% of the initial amount of the loan, it's crucial to know how your Maryland home has increased in value. After all, all of the appreciation you've achieved over the years counts towards removing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Even when nationwide trends signify lower overall home values, understand that real estate is local. Your neighborhood may not be following the national trends and/or your home could have secured equity before things declined. An accredited, Maryland licensed real estate appraiser can help home owners figure out just when their home's equity goes over the 20% point, as it's a difficult thing to know. It's an appraiser's job to keep up with the market dynamics of their area. At Canter Fields Real Estate, LLC, we know when property values have risen or declined. We're masters at determining value trends in Accokeek, Prince Georges County, and surrounding areas. When faced with information from an appraiser, the mortgage company will usually eliminate the PMI with little anxiety. At that time, the homeowner can enjoy 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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