Have equity in your home? Want a lower payment? An appraisal from P.M. Appraisals, Inc. can help you get rid of your PMI.
When getting a mortgage, a 20% down payment is usually the standard. Since the liability for the lender is usually only the remainder between the home value and the sum due on the loan, the 20% provides a nice buffer against the charges of foreclosure, selling the home again, and regular value variationson the chance that a purchaser doesn't pay.
During the recent mortgage boom of the mid 2000s, it was common to see lenders commanding down payments of 10, 5 or often 0 percent. A lender is able to handle the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplemental policy guards the lender in case a borrower doesn't pay on the loan and the market price of the property is less than the loan balance.
PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and often isn't even tax deductible. Contradictory to a piggyback loan where the lender takes in all the deficits, PMI is beneficial for the lender because they collect 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 home buyers can prevent bearing the cost of PMI
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law pledges that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent. So, savvy home owners can get off the hook sooner than expected.
It can take countless years to get to the point where the principal is just 20% of the initial amount borrowed, so it's essential 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 should you pay it after your loan balance has fallen below the 80% threshold? Your neighborhood may not be heeding the national trends and/or your home may have acquired equity before things calmed down, so even when nationwide trends forecast falling home values, you should realize that real estate is local.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. It is an appraiser's job to know the market dynamics of their area. At P.M. Appraisals, Inc., we're experts at pinpointing value trends in Babylon, Suffolk County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will often remove the PMI with little anxiety. At which time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: