Have equity in your home? Want a lower payment? An appraisal from Race Appraisal Services, LLC can help you get rid of your PMI.
When purchasing a home, a 20% down payment is typically the standard. The lender's risk is oftentimes only the remainder between the home value and the amount remaining on the loan, so the 20% supplies a nice buffer against the costs of foreclosure, reselling the home, and regular value fluctuations on the chance that a purchaser defaults.
The market was accepting down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. 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 in the event a borrower doesn't pay on the loan and the worth of the house is less than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and frequently isn't even tax deductible, PMI is costly to a borrower. It's advantageous for the lender because they secure the money, and they receive payment if the borrower defaults, opposite from a piggyback loan where the lender takes in all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How buyers can refrain from paying PMI
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law promises that, at the request of the home owner, the PMI must be released when the principal amount equals only 80 percent. So, keen home owners can get off the hook a little earlier.
It can take countless years to reach the point where the principal is just 20% of the original amount of the loan, so it's important to know how your home has appreciated in value. After all, every bit of appreciation you've achieved over the years counts towards removing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not be reflecting the national trends and/or your home could have gained equity before things cooled off, so even when nationwide trends indicate decreasing home values, you should understand that real estate is local.
The difficult thing for most home owners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can surely help. As appraisers, it's our job to understand the market dynamics of our area. At Race Appraisal Services, LLC, we know when property values have risen or declined. We're experts at analyzing value trends in East Longmeadow, Hampden County and surrounding areas. When faced with data from an appraiser, the mortgage company will generally drop the PMI with little anxiety. At which time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link:
Would you like to save money by not having to pay for Private Mortgage Insurance? We can help. Simply fill out the form below as completely as possible and we'll send you information on how to save PMI expenses, with no obligation to you. We guarantee your privacy.