DAS Appraisals can help you remove your Private Mortgage Insurance
A 20% down payment is typically the standard when getting a mortgage. Because the liability for the lender is oftentimes only the difference between the home value and the sum remaining on the loan, the 20% adds a nice cushion against the expenses of foreclosure, reselling the home, and natural value fluctuationson the chance that a purchaser defaults.
During the recent mortgage boom of the mid 2000s, it became common to see lenders requiring down payments of 10, 5 or even 0 percent. A lender is able to endure the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI guards the lender in case 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 compiled into the mortgage monthly payment and often isn't even tax deductible, PMI can be expensive to a borrower. It's profitable for the lender because they obtain the money, and they get paid if the borrower is unable to pay, unlike a piggyback loan where the lender takes in 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 homeowners prevent bearing the expense of PMI?
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law promises that, at the request of the homeowner, the PMI must be released when the principal amount equals just 80 percent. So, wise homeowners can get off the hook sooner than expected.
It can take countless years to arrive at the point where the principal is only 20% of the initial loan amount, so it's important to know how your home has increased in value. After all, every bit of appreciation you've accomplished over the years counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% mark? Despite the fact that nationwide trends indicate plummeting home values, understand that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home could have secured equity before things calmed down.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. As appraisers, it's our job to understand the market dynamics of our 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 usually drop the PMI with little trouble. At that 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: