Let DANIEL I KANDEL help you decide if you can cancel your PMI
When buying a house, a 20% down payment is usually the standard. Because the risk for the lender is often only the remainder between the home value and the amount outstanding on the loan, the 20% supplies a nice buffer against the charges of foreclosure, selling the home again, and typical value variationsin the event a purchaser doesn't pay.
During the recent mortgage boom of the mid 2000s, it was customary to see lenders commanding down payments of 10, 5 or even 0 percent. A lender is able to manage the added risk of the minimal down payment with Private Mortgage Insurance or PMI. This supplemental policy protects the lender in case a borrower doesn't pay on the loan and the value of the house is less than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI is pricey to a borrower. It's money-making for the lender because they acquire the money, and they get paid if the borrower is unable to pay, separate from a piggyback loan where the lender consumes all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homebuyers can refrain from bearing the expense of PMI
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically cease the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law states that, at the request of the home owner, the PMI must be released when the principal amount reaches only 80 percent. So, wise home owners can get off the hook sooner than expected.
It can take many years to arrive at the point where the principal is only 20% of the initial loan amount, so it's crucial to know how your home has increased in value. After all, every bit of appreciation you've obtained over the years counts towards removing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% mark? Even when nationwide trends hint at declining home values, understand that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home may have secured equity before things cooled off.
The toughest thing for almost all homeowners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can surely help. As appraisers, it's our job to recognize the market dynamics of our area. At DANIEL I KANDEL, we know when property values have risen or declined. We're masters at recognizing value trends in Weston/Ft. Lauderdale, Broward County and surrounding areas. When faced with figures from an appraiser, the mortgage company will generally drop the PMI with little effort. At which time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: