DAS Appraisals can help you remove your Private Mortgage Insurance
It's generally understood that a 20% down payment is common when buying a house. Since the liability for the lender is usually only the difference between the home value and the amount due on the loan, the 20% provides a nice cushion against the charges of foreclosure, selling the home again, and regular value variationsin the event a purchaser defaults.
During the recent mortgage boom of the last decade, it became common to see lenders commanding down payments of 10, 5 or sometimes 0 percent. How does a lender endure the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI protects the lender if a borrower is unable to pay on the loan and the market price of the house is less than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and frequently isn't even tax deductible, PMI can be pricey to a borrower. Unlike a piggyback loan where the lender absorbs all the losses, PMI is lucrative for the lender because they secure the money, and they get paid if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home buyer prevent bearing the cost of PMI?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law states that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent. So, smart 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 initial amount borrowed, it's important to know how your home has grown in value. After all, any appreciation you've gained over the years counts towards abolishing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood might not be heeding the national trends and/or your home might have acquired equity before things simmered down, so even when nationwide trends indicate falling home values, you should understand that real estate is local.
The difficult thing for many homeowners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can definitely help. It's an appraiser's job to understand the market dynamics of their area. At DAS Appraisals, we know when property values have risen or declined. We're experts at identifying value trends in Hackensack, Rockland County and surrounding areas. When faced with figures from an appraiser, the mortgage company will usually remove the PMI with little trouble. At which 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: