PSM Appraisals, LLC can help you remove your Private Mortgage Insurance
When getting a mortgage, a 20% down payment is usually the standard. Since the risk for the lender is generally only the remainder between the home value and the amount remaining on the loan, the 20% supplies a nice cushion against the charges of foreclosure, reselling the home, and regular value variationsin the event a borrower defaults.
During the recent mortgage upturn of the mid 2000s, it became common to see lenders requiring down payments of 10, 5 or often 0 percent. A lender is able to manage the additional risk of the low down payment with Private Mortgage Insurance or PMI. This supplementary policy takes care of the lender if a borrower doesn't pay on the loan and the worth of the property is lower than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and frequently isn't even tax deductible, PMI is costly to a borrower. Different from a piggyback loan where the lender consumes all the deficits, PMI is favorable for the lender because they obtain the money, and they get the money if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can buyers refrain from bearing the expense of PMI?
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Keen homeowners can get off the hook a little early. The law promises that, upon request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent.
It can take many years to arrive at the point where the principal is only 20% of the original amount borrowed, so it's crucial to know how your home has grown in value. After all, every bit of appreciation you've gained over time counts towards abolishing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood might not be minding the national trends and/or your home may have gained equity before things settled down, so even when nationwide trends indicate falling home values, you should understand that real estate is local.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. It's an appraiser's job to recognize the market dynamics of their area. At PSM Appraisals, LLC, we're experts at determining value trends in Babylon, Suffolk County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will most often remove the PMI with little effort. 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: