Let Edwards Appraisal Service, Inc. help you determine if you can get rid of your PMI
A 20% down payment is typically accepted when getting a mortgage. The lender's risk is often only the remainder between the home value and the amount remaining on the loan, so the 20% adds a nice cushion against the expenses of foreclosure, selling the home again, and typical value fluctuations on the chance that a borrower defaults.
The market was taking down payments as low as 10, 5 and even 0 percent during the mortgage boom of the last decade. How does a lender handle the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This additional policy guards the lender if a borrower defaults on the loan and the market price of the home is less than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and generally isn't even tax deductible, PMI is pricey to a borrower. It's lucrative for the lender because they acquire the money, and they receive payment if the borrower doesn't pay, opposite 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 home buyers can refrain from bearing the cost of PMI
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law promises that, upon request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent. So, keen homeowners can get off the hook ahead of time.
Considering it can take many years to get to the point where the principal is only 20% of the initial loan amount, it's crucial to know how your home has appreciated in value. After all, all of the appreciation you've acquired over the years counts towards dismissing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Your neighborhood may not be minding the national trends and/or your home might have acquired equity before things settled down, so even when nationwide trends hint at declining home values, you should realize that real estate is local.
The difficult thing for many homeowners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. As appraisers, it's our job to recognize the market dynamics of our area. At Edwards Appraisal Service, Inc., we know when property values have risen or declined. We're masters at identifying value trends in Goldsboro, Wayne County and surrounding areas. When faced with figures from an appraiser, the mortgage company will usually 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:
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