Have equity in your home? Want a lower payment? An appraisal from PSM Appraisals, LLC can help you get rid of your PMI.
It's widely understood that a 20% down payment is the standard when purchasing a home. The lender's risk is oftentimes only the remainder between the home value and the amount remaining on the loan, so the 20% provides a nice cushion against the costs of foreclosure, reselling the home, and typical value variations on the chance that a purchaser is unable to pay.
The market was taking down payments down to 10, 5 and often 0 percent during the mortgage boom of the last decade. A lender is able to manage the increased risk of the low down payment with Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower doesn't pay on the loan and the worth of the home is lower than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and often isn't even tax deductible, PMI is costly to a borrower. It's lucrative for the lender because they obtain the money, and they get paid if the borrower defaults, unlike 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 home owner prevent paying PMI?
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Acute home owners can get off the hook beforehand. The law pledges that, at the request of the home owner, the PMI must be dropped when the principal amount reaches only 80 percent.
Considering it can take countless years to reach the point where the principal is just 20% of the original amount borrowed, it's necessary to know how your home has appreciated 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 your loan balance has dropped below the 80% mark? Your neighborhood might not be adopting the national trends and/or your home could have gained equity before things calmed down, so even when nationwide trends predict plummeting home values, you should realize that real estate is local.
An accredited, 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 PSM Appraisals, LLC, we know when property values have risen or declined. We're experts at analyzing value trends in Babylon, Suffolk County and surrounding areas. Faced with data from an appraiser, the mortgage company will most often do away with the PMI with little trouble. At that 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: