Let Edwards Appraisal Service, Inc. help you figure out if you can eliminate your PMI
A 20% down payment is usually accepted when purchasing a home. Considering the liability for the lender is often only the difference between the home value and the sum outstanding on the loan, the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and regular value fluctuationsin the event a purchaser defaults.
Lenders were taking down payments as low as 10, 5 and often 0 percent during the mortgage boom of the last decade. A lender is able to manage the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI covers the lender if a borrower defaults on the loan and the market price 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 compiled into the mortgage payment and often isn't even tax deductible. Separate from a piggyback loan where the lender consumes all the costs, PMI is profitable for the lender because they obtain 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 homeowners can keep from bearing the cost of PMI
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically eliminate 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 beforehand. The law states that, upon request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent.
Because it can take many years to arrive at the point where the principal is just 20% of the initial amount of the loan, it's essential to know how your home has grown in value. After all, all of the appreciation you've acquired over the years counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not be adopting the national trends and/or your home may have gained equity before things cooled off, so even when nationwide trends indicate falling home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. As appraisers, it's our job to understand the market dynamics of our area. At Edwards Appraisal Service, Inc., we know when property values have risen or declined. We're experts at pinpointing value trends in Goldsboro, Wayne 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 homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link:
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