Have equity in your home? Want a lower payment? An appraisal from DAS Appraisals can help you get rid of your PMI.
It's widely inferred that a 20% down payment is the standard when getting a mortgage. The lender's liability is oftentimes only the remainder between the home value and the sum due on the loan, so the 20% adds a nice cushion against the costs of foreclosure, reselling the home, and regular value variations in the event a purchaser is unable to pay.
Lenders were taking down payments as low as 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. A lender is able to endure the added risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower defaults 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 lumped into the mortgage monthly payment and often isn't even tax deductible, PMI can be costly to a borrower. It's beneficial for the lender because they obtain the money, and they get paid if the borrower defaults, contradictory to a piggyback loan where the lender consumes all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home buyers keep from paying PMI?
The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Keen homeowners can get off the hook a little early. The law guarantees that, upon request of the home owner, the PMI must be released when the principal amount equals just 80 percent.
It can take countless years to get to the point where the principal is only 20% of the initial loan amount, so it's essential to know how your home has increased in value. After all, all of the appreciation you've achieved over the years counts towards dismissing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends predict plummeting home values, be aware that real estate is local. Your neighborhood may not be heeding the national trends and/or your home might have acquired equity before things calmed down.
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 difficult thing to know. As appraisers, it's our job to recognize the market dynamics of our 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. When faced with figures from an appraiser, the mortgage company will generally drop the PMI with little effort. At which time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: