DAS Appraisals can help you remove your Private Mortgage Insurance
It's generally understood that a 20% down payment is common when getting a mortgage. The lender's liability is often only the difference between the home value and the sum due on the loan, so the 20% supplies a nice cushion against the expenses of foreclosure, selling the home again, and regular value variations on the chance that a purchaser defaults.
The market was taking down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the added risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI protects the lender if a borrower doesn't pay on the loan and the market price of the home is lower than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and generally isn't even tax deductible, PMI can be costly to a borrower. Contradictory to a piggyback loan where the lender absorbs all the costs, PMI is beneficial for the lender because they secure the money, and they get the money if the borrower doesn't 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 refrain from paying PMI?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law promises that, upon request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent. So, smart homeowners can get off the hook a little early.
Since it can take many years to get to the point where the principal is just 20% of the original amount borrowed, it's essential to know how your home has grown in value. After all, any appreciation you've accomplished over time counts towards dismissing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Your neighborhood may not be adhering to the national trends and/or your home might have gained equity before things simmered down, so even when nationwide trends hint at falling home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. It's an appraiser's job to keep up with the market dynamics of their area. At DAS Appraisals, we know when property values have risen or declined. We're masters at recognizing value trends in Hackensack, Rockland County and surrounding areas. Faced with data from an appraiser, the mortgage company will usually remove the PMI with little effort. At which time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: