Have equity in your home? Want a lower payment? An appraisal from P.M. Appraisals, Inc. can help you get rid of your PMI.
A 20% down payment is typically accepted when purchasing a home. The lender's liability is usually only the remainder between the home value and the amount outstanding on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and natural value variations on the chance that a borrower is unable to pay.
Lenders were working with down payments as low as 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. How does a lender endure the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This supplementary policy protects the lender in case a borrower is unable to pay on the loan and the market price of the property is lower than the loan balance.
PMI can be costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and oftentimes isn't even tax deductible. Contradictory to a piggyback loan where the lender absorbs all the damages, PMI is profitable for the lender because they acquire 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 home buyers prevent bearing the cost of PMI?
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law stipulates that, upon request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent. So, savvy homeowners can get off the hook sooner than expected.
Since it can take countless years to reach the point where the principal is just 20% of the original loan amount, it's important to know how your home has appreciated in value. After all, any appreciation you've achieved over time counts towards dismissing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Even when nationwide trends signify decreasing home values, be aware that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home could have gained equity before things simmered down.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. It's an appraiser's job to know 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 information from an appraiser, the mortgage company will most often remove the PMI with little trouble. At that time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: