Let Charlestown Mercant help you figure out if you can cancel your PMIIt's widely known that a 20% down payment is common when getting a mortgage. Since the liability for the lender is usually only the remainder between the home value and the amount remaining on the loan, the 20% adds a nice buffer against the expenses of foreclosure, reselling the home, and typical value variations in the event a purchaser is unable to pay.During the recent mortgage boom that our country recently experienced, it was common to see lenders only asking for down payments of 10, 5, 3 or even 0 percent. A lender is able to manage the added risk of the small down payment with Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower is unable to pay on the loan and the market price of the property is lower than what is owed on the loan. Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and on many occasions isn't even tax deductible, PMI can be expensive to a borrower. Unlike a piggyback loan where the lender takes in all the losses, PMI is beneficial for the lender because they obtain the money, and they are covered if the borrower is unable to pay.
How can a home owner prevent paying PMI?The Homeowners Protection Act of 1998 obligates the lenders on the majority of loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Acute home owners can get off the hook ahead of time. The law states that, at the request of the homeowner, the PMI must be released when the principal amount equals just 80 percent.Since it can take several years to get to the point where the principal is just 80% of the original amount borrowed, it's necessary to know how your South Carolina home has appreciated in value. After all, any appreciation you've accomplished over time counts towards abolishing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Even when nationwide trends indicate falling home values, understand that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home may have gained equity before things simmered down. The difficult thing for many homeowners to figure out is whether their home equity has exceeded the 20% point. An accredited, South Carolina licensed real estate appraiser can definitely help. It is an appraiser's job to understand the market dynamics of their area. At Charlestown Mercant, we know when property values have risen or declined. We're experts at identifying value trends in Summerville, Dorchester County, and surrounding areas. Faced with figures from an appraiser, the mortgage company will generally drop the PMI with little trouble. 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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