DAS Appraisals can help you remove your Private Mortgage Insurance
When buying a house, a 20% down payment is typically the standard. The lender's liability is oftentimes only the difference between the home value and the amount remaining on the loan, so the 20% adds a nice cushion against the expenses of foreclosure, reselling the home, and regular value fluctuations on the chance that a borrower is unable to pay.
The market was accepting down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender manage the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower doesn't pay on the loan and the value of the house is less than the balance of the loan.
PMI is costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and many times isn't even tax deductible. Contradictory to a piggyback loan where the lender absorbs all the losses, PMI is money-making for the lender because they collect the money, and they get paid 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 can a homeowner prevent bearing the cost of PMI?
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law stipulates that, at the request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent. So, wise homeowners can get off the hook a little early.
Considering it can take many years to get to the point where the principal is only 20% of the original amount of the loan, it's important to know how your home has appreciated in value. After all, every bit of appreciation you've obtained over the years counts towards removing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Your neighborhood may not be adopting the national trends and/or your home might have secured equity before things calmed down, so even when nationwide trends forecast 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. It is an appraiser's job to understand the market dynamics of their area. At DAS Appraisals, we're masters at recognizing value trends in Hackensack, Rockland County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will often eliminate the PMI with little trouble. 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: