P.M. Appraisals, Inc. can help you remove your Private Mortgage Insurance
It's widely understood that a 20% down payment is common when purchasing a home. The lender's liability is oftentimes only the difference between the home value and the sum due on the loan, so the 20% provides a nice cushion against the expenses of foreclosure, reselling the home, and regular value changes in the event a purchaser defaults.
Lenders were working with down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender endure the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower defaults on the loan and the market price of the house is less than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and frequently isn't even tax deductible, PMI is pricey to a borrower. It's beneficial for the lender because they obtain the money, and they receive payment if the borrower is unable to pay, opposite from a piggyback loan where the lender absorbs all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can buyers prevent bearing the expense of PMI?
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law designates that, at the request of the home owner, the PMI must be released when the principal amount equals just 80 percent. So, keen home owners can get off the hook a little earlier.
Since it can take countless years to arrive at the point where the principal is only 20% of the original loan amount, it's crucial to know how your home has increased in value. After all, every bit of appreciation you've achieved over time counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% mark? Even when nationwide trends indicate declining home values, realize that real estate is local. Your neighborhood may not be heeding the national trends and/or your home could have gained equity before things cooled off.
The difficult thing for most homeowners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can definitely help. It's an appraiser's job to understand the market dynamics of their area. At P.M. Appraisals, Inc., we know when property values have risen or declined. We're experts at identifying value trends in Babylon, Suffolk County and surrounding areas. Faced with figures from an appraiser, the mortgage company will most often remove the PMI with little trouble. At that time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: