Have equity in your home? Want a lower payment? An appraisal from DAS Appraisals can help you get rid of your PMI.
When buying a house, a 20% down payment is typically the standard. Considering the liability for the lender is generally only the remainder between the home value and the amount due on the loan, the 20% supplies a nice buffer against the costs of foreclosure, reselling the home, and natural value fluctuationsin the event a borrower doesn't pay.
Lenders were taking down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender handle the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower defaults on the loan and the market price of the house is less than what the borrower still owes on the loan.
PMI can be expensive to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and generally isn't even tax deductible. Opposite from a piggyback loan where the lender takes in all the damages, PMI is beneficial for the lender because they obtain the money, and they receive payment 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 homeowners can keep from paying PMI
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law promises that, upon request of the home owner, the PMI must be released when the principal amount reaches just 80 percent. So, wise homeowners can get off the hook a little early.
Because it can take countless years to reach the point where the principal is only 20% of the initial amount of the loan, it's important to know how your home has grown in value. After all, every bit of appreciation you've accomplished over the years counts towards removing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Your neighborhood might not be adopting the national trends and/or your home could have secured equity before things calmed down, so even when nationwide trends indicate plunging home values, you should understand that real estate is local.
The toughest thing for most home owners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can surely help. It is an appraiser's job to understand the market dynamics of their area. At DAS Appraisals, we're masters at determining value trends in Hackensack, Rockland County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will often do away with 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: