Have equity in your home? Want a lower payment? An appraisal from DAS Appraisals can help you get rid of your PMI.
It's largely known that a 20% down payment is the standard when buying a house. Since the risk for the lender is usually only the remainder between the home value and the sum due on the loan, the 20% supplies a nice cushion against the charges of foreclosure, reselling the home, and regular value changesin the event a purchaser is unable to pay.
During the recent mortgage upturn of the mid 2000s, it was customary to see lenders requiring down payments of 10, 5 or often 0 percent. How does a lender handle the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower doesn't pay on the loan and the worth of the house is less than what is owed on the loan.
PMI is pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and frequently isn't even tax deductible. It's advantageous for the lender because they secure the money, and they get the money if the borrower doesn't pay, different from 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 buyers can refrain from paying PMI
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically stop the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Keen home owners can get off the hook ahead of time. The law stipulates that, upon request of the home owner, the PMI must be released when the principal amount equals just 80 percent.
Since it can take countless years to arrive at the point where the principal is only 20% of the initial amount borrowed, it's necessary to know how your home has appreciated in value. After all, any appreciation you've gained over time counts towards removing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% mark? Your neighborhood may not be reflecting the national trends and/or your home may have gained equity before things settled down, so even when nationwide trends indicate falling home values, you should understand that real estate is local.
The hardest thing for many homeowners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can surely help. As appraisers, it's our job to understand the market dynamics of our area. At DAS Appraisals, we're experts at recognizing value trends in Hackensack, Rockland County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will most often eliminate the PMI with little effort. At which 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: