Have equity in your home? Want a lower payment? An appraisal from P.M. Appraisals, Inc. can help you get rid of your PMI.
A 20% down payment is usually the standard when getting a mortgage. The lender's risk is generally only the difference between the home value and the sum due on the loan, so the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and regular value changes in the event a borrower defaults.
During the recent mortgage upturn of the last decade, it became widespread to see lenders taking down payments of 10, 5 or sometimes 0 percent. How does a lender manage the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This additional policy covers the lender in case a borrower defaults on the loan and the worth of the house is lower than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and generally isn't even tax deductible, PMI can be costly to a borrower. It's money-making for the lender because they collect the money, and they get the money if the borrower is unable to pay, contradictory to a piggyback loan where the lender takes in all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homebuyers prevent paying PMI?
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Keen home owners can get off the hook ahead of time. The law states that, upon request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent.
Because it can take many years to get to the point where the principal is just 20% of the original amount of the loan, it's essential to know how your home has increased in value. After all, all of the appreciation you've gained over time counts towards removing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% threshold? Your neighborhood might not be adopting the national trends and/or your home could have acquired equity before things settled down, so even when nationwide trends signify decreasing home values, you should realize that real estate is local.
The difficult thing for almost all home owners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can surely help. It's an appraiser's job to keep up with 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 information from an appraiser, the mortgage company will generally cancel the PMI with little trouble. At that 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: