Let DAS Appraisals help you learn if you can get rid of your PMI
When buying a house, a 20% down payment is typically the standard. The lender's liability is often only the remainder between the home value and the sum remaining on the loan, so the 20% provides a nice cushion against the charges of foreclosure, reselling the home, and typical value fluctuations on the chance that a borrower defaults.
The market was working with down payments down to 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. A lender is able to manage the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplementary plan protects the lender if a borrower doesn't pay on the loan and the worth of the home is lower than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and often isn't even tax deductible, PMI can be costly to a borrower. Opposite from a piggyback loan where the lender consumes all the losses, PMI is favorable for the lender because they obtain 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 a homeowner refrain from bearing the cost of PMI?
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Keen home owners can get off the hook ahead of time. The law designates that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent.
It can take many years to get to the point where the principal is only 20% of the original amount borrowed, so it's important to know how your home has appreciated in value. After all, every bit of appreciation you've accomplished over the years counts towards abolishing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Even when nationwide trends forecast falling home values, realize that real estate is local. Your neighborhood may not be heeding the national trends and/or your home may have gained equity before things settled down.
The difficult thing for most home owners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can definitely help. It is an appraiser's job to keep up with the market dynamics of their area. At DAS Appraisals, we're experts at pinpointing value trends in Hackensack, Rockland County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will most often cancel the PMI with little anxiety. At which time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: