Have equity in your home? Want a lower payment? An appraisal from P.M. Appraisals, Inc. can help you get rid of your PMI.
It's typically understood that a 20% down payment is common when buying a house. Considering the liability for the lender is usually only the difference between the home value and the amount due on the loan, the 20% adds a nice buffer against the expenses of foreclosure, selling the home again, and typical value fluctuationson the chance that a purchaser is unable to pay.
During the recent mortgage upturn of the last decade, it became customary to see lenders requiring down payments of 10, 5 or sometimes 0 percent. A lender is able to endure the added risk of the small down payment with Private Mortgage Insurance or PMI. This supplemental policy takes care of the lender in case a borrower doesn't pay on the loan and the market price of the home is lower than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and generally isn't even tax deductible, PMI can be pricey to a borrower. Separate from a piggyback loan where the lender absorbs all the damages, PMI is favorable for the lender because they secure the money, and they get paid 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 a buyer avoid paying PMI?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law designates that, at the request of the home owner, the PMI must be released when the principal amount reaches just 80 percent. So, smart homeowners can get off the hook sooner than expected.
Considering it can take countless years to reach the point where the principal is only 20% of the initial loan amount, it's important to know how your home has grown in value. After all, every bit of appreciation you've achieved over the years counts towards removing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not be adhering to the national trends and/or your home may have acquired equity before things simmered down, so even when nationwide trends signify decreasing home values, you should realize that real estate is local.
The hardest thing for almost all home owners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can definitely help. As appraisers, it's our job to recognize the market dynamics of our area. At P.M. Appraisals, Inc., we're experts at identifying 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 usually remove the PMI with little effort. At which 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: