Let Premier Appraisals, Inc. help you learn if you can eliminate your PMI
A 20% down payment is typically the standard when buying a house. Considering the risk for the lender is generally only the remainder between the home value and the amount remaining on the loan, the 20% supplies a nice cushion against the charges of foreclosure, reselling the home, and typical value variationsin the event a purchaser defaults.
During the recent mortgage upturn of the last decade, it became customary to see lenders taking down payments of 10, 5 or even 0 percent. How does a lender manage the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower is unable to pay on the loan and the value of the house is less than the loan balance.
PMI is pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and oftentimes isn't even tax deductible. It's favorable for the lender because they secure the money, and they receive payment if the borrower is unable to pay, unlike a piggyback loan where the lender takes in 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 homebuyer keep from bearing the expense of PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law states that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, smart homeowners can get off the hook a little earlier.
It can take many years to get to the point where the principal is only 20% of the initial amount of the loan, so it's important to know how your home has grown in value. After all, any appreciation you've acquired over time counts towards removing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood might not be reflecting the national trends and/or your home may have gained equity before things calmed down, so even when nationwide trends predict decreasing home values, you should understand that real estate is local.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. As appraisers, it's our job to understand the market dynamics of our area. At Premier Appraisals, Inc., we're experts at pinpointing value trends in Nesconset, Suffolk County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will generally drop 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: