Have equity in your home? Want a lower payment? An appraisal from DAS Appraisals can help you get rid of your PMI.
When purchasing a home, a 20% down payment is typically the standard. Since the risk for the lender is often only the remainder between the home value and the sum due on the loan, the 20% supplies a nice cushion against the expenses of foreclosure, reselling the home, and natural value variationson the chance that a borrower defaults.
During the recent mortgage boom of the last decade, it became customary to see lenders commanding down payments of 10, 5 or sometimes 0 percent. A lender is able to handle the added risk of the small down payment with Private Mortgage Insurance or PMI. This supplemental plan takes care of the lender if a borrower is unable to pay on the loan and the value of the house is less than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and often isn't even tax deductible, PMI is pricey to a borrower. Contradictory to a piggyback loan where the lender absorbs all the damages, PMI is money-making for the lender because they secure 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 homeowners prevent paying PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law pledges that, upon request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent. So, smart home owners can get off the hook ahead of time.
It can take countless years to get to the point where the principal is just 20% of the initial amount of the loan, so it's necessary to know how your home has grown in value. After all, all of the appreciation you've achieved over time counts towards dismissing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood may not be heeding the national trends and/or your home may have secured equity before things simmered down, so even when nationwide trends signify declining home values, you should realize that real estate is local.
The difficult thing for most home owners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. 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 pinpointing value trends in Hackensack, Rockland County and surrounding areas. When faced with data from an appraiser, the mortgage company will generally cancel the PMI with little trouble. At that 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: