Have equity in your home? Want a lower payment? An appraisal from P.M. Appraisals, Inc. can help you get rid of your PMI.
When buying a house, a 20% down payment is typically the standard. Since the risk for the lender is oftentimes only the difference between the home value and the sum remaining on the loan, the 20% adds a nice buffer against the charges of foreclosure, selling the home again, and natural value variationson the chance that a purchaser is unable to pay.
During the recent mortgage boom of the last decade, it became common to see lenders commanding down payments of 10, 5 or even 0 percent. A lender is able to endure the added risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower defaults on the loan and the market price of the home is less than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and oftentimes isn't even tax deductible, PMI can be costly to a borrower. Contradictory to a piggyback loan where the lender absorbs all the costs, PMI is advantageous for the lender because they collect the money, and they get the money if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homebuyers can prevent paying PMI
The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law pledges 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 earlier.
It can take countless years to arrive at the point where the principal is just 20% of the original amount of the loan, so it's important to know how your home has increased in value. After all, every bit of appreciation you've accomplished over the years counts towards removing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Despite the fact that nationwide trends forecast declining home values, be aware that real estate is local. Your neighborhood might not be minding the national trends and/or your home might have acquired equity before things cooled off.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a tough thing to know. It's an appraiser's job to recognize the market dynamics of their area. At P.M. Appraisals, Inc., we're masters at determining value trends in Babylon, Suffolk County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will often eliminate the PMI with little effort. At which time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: