Let Premier Appraisals, Inc. help you discover if you can cancel your PMI
A 20% down payment is usually the standard when getting a mortgage. The lender's liability is usually only the difference between the home value and the amount due on the loan, so the 20% provides a nice cushion against the costs of foreclosure, selling the home again, and regular value changes on the chance that a purchaser doesn't pay.
During the recent mortgage boom of the last decade, it became customary to see lenders requiring down payments of 10, 5 or often 0 percent. A lender is able to endure the increased risk of the small down payment with Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower defaults on the loan and the worth of the property is less than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and oftentimes isn't even tax deductible, PMI is costly to a borrower. Opposite from a piggyback loan where the lender takes in all the losses, PMI is money-making for the lender because they acquire the money, and they receive payment 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 home buyers can avoid bearing the expense of PMI
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law promises that, at the request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent. So, wise homeowners can get off the hook ahead of time.
Considering it can take many years to reach the point where the principal is only 20% of the original loan amount, it's important to know how your home has increased in value. After all, any appreciation you've acquired over the years counts towards dismissing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Your neighborhood may not be reflecting the national trends and/or your home might have secured equity before things settled down, so even when nationwide trends hint at plunging home values, you should realize that real estate is local.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a tough thing to know. It is an appraiser's job to recognize the market dynamics of their area. At Premier Appraisals, Inc., we know when property values have risen or declined. We're masters at pinpointing value trends in Nesconset, Suffolk County and surrounding areas. When faced with data from an appraiser, the mortgage company will most often do away with the PMI with little effort. At which 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: