Have equity in your home? Want a lower payment? An appraisal from Real Property Appraisal LLC can help you get rid of your PMI.
It's typically inferred that a 20% down payment is accepted when purchasing a home. The lender's risk is generally only the difference between the home value and the amount remaining on the loan, so the 20% provides a nice cushion against the costs of foreclosure, reselling the home, and natural value changes in the event a purchaser defaults.
During the recent mortgage upturn of the last decade, it became common to see lenders taking down payments of 10, 5 or often 0 percent. A lender is able to endure the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. This added plan covers the lender in the event a borrower defaults on the loan and the worth of the home is less than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and generally isn't even tax deductible, PMI is pricey to a borrower. Unlike a piggyback loan where the lender takes in all the losses, PMI is profitable for the lender because they secure the money, and they get paid 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 homebuyers can prevent paying PMI
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Savvy home owners can get off the hook a little earlier. The law designates that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent.
Considering it can take many years to reach the point where the principal is only 20% of the initial amount of the loan, it's crucial to know how your home has appreciated in value. After all, all of the appreciation you've obtained over time counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% mark? Despite the fact that nationwide trends hint at declining home values, realize that real estate is local. Your neighborhood might not be following the national trends and/or your home could have acquired equity before things settled down.
The toughest thing for almost all homeowners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can surely help. It is an appraiser's job to recognize the market dynamics of their area. At Real Property Appraisal LLC, we're masters at identifying value trends in CLIFTON, Passaic County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will most often cancel the PMI with little trouble. At which time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: