Have equity in your home? Want a lower payment? An appraisal from DAS Appraisals can help you get rid of your PMI.
A 20% down payment is usually accepted when getting a mortgage. The lender's liability is oftentimes only the difference between the home value and the amount remaining on the loan, so the 20% supplies a nice cushion against the expenses of foreclosure, selling the home again, and regular value changes on the chance that a purchaser is unable to pay.
During the recent mortgage boom of the mid 2000s, it became common to see lenders commanding down payments of 10, 5 or even 0 percent. How does a lender manage the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This added plan guards the lender if a borrower is unable to pay on the loan and the value of the home is lower than the balance of the loan.
PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and often isn't even tax deductible. It's profitable for the lender because they obtain the money, and they receive payment if the borrower is unable to pay, opposite from a piggyback loan where the lender consumes all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homebuyers can prevent bearing the expense of PMI
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law promises that, upon request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent. So, acute home owners can get off the hook a little earlier.
It can take countless years to get to the point where the principal is only 20% of the original amount of the loan, so it's essential to know how your home has appreciated in value. After all, all of the appreciation you've achieved over time counts towards removing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood may not be following the national trends and/or your home could have secured equity before things simmered down, so even when nationwide trends forecast falling home values, you should realize that real estate is local.
The toughest thing for most home owners to know is just when their home's equity goes over the 20% point. An accredited, 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 masters at identifying value trends in Hackensack, Rockland County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will usually remove the PMI with little trouble. At that time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: