Let P.M. Appraisals, Inc. help you determine if you can cancel your PMI
A 20% down payment is usually the standard when getting a mortgage. The lender's risk is oftentimes only the difference between the home value and the sum outstanding on the loan, so the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and typical value changes on the chance that a purchaser is unable to pay.
The market was taking down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender endure the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI protects the lender in the event a borrower defaults on the loan and the worth of the property is less than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and generally isn't even tax deductible, PMI can be costly to a borrower. Opposite from a piggyback loan where the lender takes in all the damages, PMI is favorable for the lender because they acquire the money, and they receive payment if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home owners keep from bearing the cost of PMI?
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Wise homeowners can get off the hook a little earlier. The law states that, at the request of the home owner, the PMI must be released when the principal amount equals just 80 percent.
Considering it can take countless years to arrive at the point where the principal is just 20% of the initial amount of the loan, it's essential to know how your home has increased in value. After all, any appreciation you've achieved over time counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% mark? Your neighborhood may not be heeding the national trends and/or your home may have acquired equity before things calmed down, so even when nationwide trends signify falling home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. It's an appraiser's job to keep up with the market dynamics of their area. At P.M. Appraisals, Inc., we're masters at determining value trends in Babylon, Suffolk County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will often cancel the PMI with little anxiety. At that 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: