Let P.M. Appraisals, Inc. help you determine if you can get rid of your PMI
A 20% down payment is usually accepted when purchasing a home. Because the risk for the lender is often only the difference between the home value and the sum outstanding on the loan, the 20% provides a nice cushion against the charges of foreclosure, selling the home again, and typical value fluctuationson the chance that a borrower doesn't pay.
During the recent mortgage boom of the mid 2000s, it became common to see lenders taking down payments of 10, 5 or even 0 percent. A lender is able to handle the added risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplementary plan takes care of the lender if a borrower defaults on the loan and the worth of the property is lower than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and frequently isn't even tax deductible, PMI can be pricey to a borrower. It's favorable for the lender because they obtain the money, and they receive payment if the borrower defaults, separate from a piggyback loan where the lender consumes all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a buyer keep from bearing the cost of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Acute home owners can get off the hook beforehand. The law guarantees that, at the request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent.
Since it can take countless years to get to the point where the principal is just 20% of the original amount of the loan, it's important to know how your home has grown in value. After all, every bit of appreciation you've gained over the years counts towards removing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Your neighborhood might not be heeding the national trends and/or your home might have secured equity before things simmered down, so even when nationwide trends predict declining home values, you should realize that real estate is local.
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. As appraisers, it's our job to recognize the market dynamics of our area. At P.M. Appraisals, Inc., we know when property values have risen or declined. We're experts at analyzing value trends in Babylon, Suffolk County and surrounding areas. When faced with figures from an appraiser, the mortgage company will often cancel 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: