Let Amerappraise, LLC help you decide if you can get rid of your PMI
It's generally known that a 20% down payment is the standard when purchasing a home. Considering the risk for the lender is oftentimes only the difference 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 fluctuationson the chance that a purchaser doesn't pay.
During the recent mortgage boom of the mid 2000s, it became common to see lenders taking down payments of 10, 5 or even 0 percent. How does a lender endure the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI guards the lender if a borrower is unable to pay on the loan and the worth of the property is lower than the balance of the loan.
PMI can be 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 get paid if the borrower is unable to pay, different from a piggyback loan where the lender consumes all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homeowner keep from bearing the cost of PMI?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law guarantees that, upon request of the home owner, the PMI must be released when the principal amount equals just 80 percent. So, keen home owners can get off the hook a little early.
Considering it can take countless years to arrive at the point where the principal is just 20% of the original amount of the loan, it's crucial to know how your home has increased in value. After all, every bit of appreciation you've acquired over time counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not be reflecting the national trends and/or your home may have acquired equity before things simmered down, so even when nationwide trends signify declining home values, you should understand that real estate is local.
The difficult thing for many home owners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can certainly help. It is an appraiser's job to know the market dynamics of their area. At Amerappraise, LLC, we know when property values have risen or declined. We're experts at identifying value trends in Bear, New Castle County and surrounding areas. When faced with information from an appraiser, the mortgage company will most often remove 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: