Let P.M. Appraisals, Inc. help you discover if you can cancel your PMI
When buying a house, a 20% down payment is usually the standard. Because the liability for the lender is generally only the difference between the home value and the sum outstanding on the loan, the 20% adds a nice buffer against the charges of foreclosure, reselling the home, and regular value changesin the event a borrower is unable to pay.
The market was taking down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender handle the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This added policy protects the lender if a borrower doesn't pay on the loan and the worth of the house is lower than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and generally isn't even tax deductible, PMI can be pricey to a borrower. Contradictory to a piggyback loan where the lender takes in all the losses, PMI is money-making for the lender because they obtain the money, and they get the money if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can buyers avoid bearing the cost of PMI?
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Acute homeowners can get off the hook a little earlier. The law states that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent.
It can take countless years to get to the point where the principal is only 20% of the initial loan amount, so it's important to know how your home has increased in value. After all, every bit of 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? Despite the fact that nationwide trends indicate falling home values, understand that real estate is local. Your neighborhood may not be adopting the national trends and/or your home might have secured equity before things cooled off.
The hardest thing for many home owners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can certainly help. It is an appraiser's job to keep up with the market dynamics of their area. At P.M. Appraisals, Inc., we're experts at determining 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 often drop the PMI with little anxiety. At which time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: