Let Property One Appraisals help you discover if you can eliminate your PMI
When buying a house, a 20% down payment is typically the standard. Because the risk for the lender is usually only the remainder between the home value and the amount due on the loan, the 20% provides a nice cushion against the costs of foreclosure, reselling the home, and natural value fluctuationsin the event a purchaser is unable to pay.
During the recent mortgage upturn of the last decade, it became common to see lenders taking down payments of 10, 5 or even 0 percent. A lender is able to manage the additional risk of the small down payment with Private Mortgage Insurance or PMI. PMI covers the lender if a borrower is unable to pay on the loan and the value of the house is less than the loan balance.
PMI can be expensive to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and often isn't even tax deductible. Opposite from a piggyback loan where the lender absorbs all the deficits, PMI is beneficial for the lender because they collect the money, and they receive payment if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can buyers keep from paying PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically stop the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Acute homeowners can get off the hook beforehand. The law promises that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent.
It can take countless years to get to the point where the principal is just 20% of the initial amount borrowed, so it's essential to know how your home has grown in value. After all, every bit of appreciation you've achieved over time counts towards dismissing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Your neighborhood might not be adhering to the national trends and/or your home might have secured equity before things cooled off, so even when nationwide trends forecast declining home values, you should understand that real estate is local.
The toughest thing for almost all home owners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can surely help. It's an appraiser's job to keep up with the market dynamics of their area. At Property One Appraisals, we're masters at identifying value trends in Chester, Orange County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will often eliminate the PMI with little trouble. At that time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: