P.M. Appraisals, Inc. can help you remove your Private Mortgage Insurance
When getting a mortgage, a 20% down payment is typically the standard. Since the liability for the lender is oftentimes only the remainder between the home value and the amount due on the loan, the 20% supplies a nice buffer against the costs of foreclosure, selling the home again, and natural value changeson the chance that a borrower defaults.
Lenders were taking down payments down to 10, 5 and even 0 percent during the mortgage boom of the last decade. A lender is able to endure the added risk of the low down payment with Private Mortgage Insurance or PMI. This supplemental plan takes care of the lender if a borrower doesn't pay on the loan and the value of the property is lower than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and often isn't even tax deductible, PMI can be costly to a borrower. Opposite from a piggyback loan where the lender absorbs all the costs, PMI is beneficial for the lender because they collect the money, and they get the money if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home buyer prevent paying PMI?
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law guarantees that, at the request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent. So, smart homeowners 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 initial loan amount, it's necessary to know how your home has increased in value. After all, every bit of appreciation you've gained over time counts towards dismissing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold? Even when nationwide trends forecast plummeting home values, be aware that real estate is local. Your neighborhood may not be heeding the national trends and/or your home may have secured equity before things cooled off.
The hardest thing for almost all homeowners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can certainly help. As appraisers, it's our job to understand 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 information from an appraiser, the mortgage company will generally eliminate the PMI with little effort. At which time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: