P.M. Appraisals, Inc. can help you remove your Private Mortgage Insurance
A 20% down payment is typically accepted when purchasing a home. The lender's risk is often only the remainder between the home value and the amount due on the loan, so the 20% provides a nice cushion against the expenses of foreclosure, reselling the home, and typical value fluctuations in the event a borrower is unable to pay.
During the recent mortgage boom of the last decade, it was common to see lenders requiring down payments of 10, 5 or often 0 percent. How does a lender handle the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplemental policy covers the lender if a borrower defaults on the loan and the value of the house is lower than what is owed on the loan.
PMI is pricey to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and generally isn't even tax deductible. It's lucrative for the lender because they secure the money, and they get the money if the borrower is unable to pay, separate from a piggyback loan where the lender absorbs all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homebuyer avoid bearing the cost of PMI?
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law designates that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent. So, savvy home owners can get off the hook a little early.
Since it can take countless years to reach the point where the principal is just 20% of the original amount borrowed, it's important to know how your home has appreciated in value. After all, all of the appreciation you've gained over time counts towards abolishing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Despite the fact that nationwide trends hint at falling home values, understand that real estate is local. Your neighborhood might not be following the national trends and/or your home may have gained equity before things calmed down.
The hardest thing for most homeowners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can certainly help. It's an appraiser's job to recognize the market dynamics of their area. At P.M. Appraisals, Inc., we're masters at recognizing value trends in Babylon, Suffolk County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will most often eliminate the PMI with little trouble. 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: