Let DAS Appraisals help you learn if you can eliminate your PMI
It's generally known that a 20% down payment is the standard when buying a house. The lender's liability is generally only the difference between the home value and the sum due 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 down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to endure the increased risk of the small down payment with 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 home is lower than the balance of the loan.
PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and frequently isn't even tax deductible. It's lucrative for the lender because they collect the money, and they get paid if the borrower is unable to pay, unlike a piggyback loan where the lender takes in all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homeowners can refrain from paying PMI
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law pledges that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, savvy homeowners can get off the hook ahead of time.
Considering it can take many years to arrive at the point where the principal is just 20% of the initial amount borrowed, it's essential to know how your home has appreciated in value. After all, every bit of appreciation you've achieved over time counts towards abolishing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Your neighborhood might not be adhering to the national trends and/or your home could have gained equity before things settled down, so even when nationwide trends signify decreasing home values, you should realize that real estate is local.
The toughest thing for most home owners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can certainly help. It's an appraiser's job to know the market dynamics of their area. At DAS Appraisals, we know when property values have risen or declined. We're experts at pinpointing value trends in Hackensack, Rockland County and surrounding areas. Faced with information from an appraiser, the mortgage company will often remove the PMI with little anxiety. At that time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: