Let DAS Appraisals help you determine if you can cancel your PMI
A 20% down payment is typically accepted when buying a house. The lender's liability is often only the difference between the home value and the sum remaining on the loan, so the 20% provides a nice buffer against the expenses of foreclosure, reselling the home, and natural value fluctuations in the event a borrower defaults.
The market was working with down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender endure the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This added policy guards the lender if a borrower doesn't pay on the loan and the value of the home is lower than the balance of the loan.
PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and many times isn't even tax deductible. Different from a piggyback loan where the lender consumes all the losses, PMI is profitable for the lender because they acquire the money, and they receive payment 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 home buyers can keep from paying PMI
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Wise home owners can get off the hook ahead of time. The law pledges that, upon request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent.
It can take countless years to reach the point where the principal is just 20% of the initial amount borrowed, so it's important to know how your home has appreciated in value. After all, every bit of appreciation you've gained over time counts towards abolishing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Your neighborhood may not be following the national trends and/or your home could have secured equity before things cooled off, so even when nationwide trends forecast declining home values, you should understand that real estate is local.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. It's an appraiser's job to understand the market dynamics of their area. At DAS Appraisals, we know when property values have risen or declined. We're masters at analyzing value trends in Hackensack, Rockland County and surrounding areas. When faced with data from an appraiser, the mortgage company will most often cancel the PMI with little anxiety. At that time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: