Let Premier Appraisals, Inc. help you figure out if you can get rid of your PMI
When purchasing a home, a 20% down payment is usually the standard. The lender's risk is often only the remainder between the home value and the amount remaining on the loan, so the 20% supplies a nice buffer against the costs of foreclosure, selling the home again, and typical value fluctuations on the chance that a purchaser doesn't pay.
The market was working with down payments down to 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender endure the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This additional plan takes care of the lender if a borrower is unable to pay on the loan and the value of the home is less than the loan balance.
PMI can be pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and many times isn't even tax deductible. It's profitable for the lender because they secure the money, and they receive payment if the borrower is unable to pay, opposite from a piggyback loan where the lender absorbs all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home owners refrain from paying PMI?
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically cease the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Wise homeowners can get off the hook beforehand. The law designates that, at the request of the homeowner, the PMI must be released when the principal amount equals just 80 percent.
Because it can take countless years to reach the point where the principal is just 20% of the initial amount borrowed, it's essential to know how your home has appreciated in value. After all, every bit of appreciation you've gained over time counts towards removing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Your neighborhood might not be reflecting the national trends and/or your home may have acquired equity before things calmed down, so even when nationwide trends hint at falling home values, you should realize that real estate is local.
The hardest thing for many home owners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can certainly help. As appraisers, it's our job to know the market dynamics of our area. At Premier Appraisals, Inc., we're experts at identifying value trends in Nesconset, Suffolk County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will often do away with the PMI with little trouble. At that time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: