Have equity in your home? Want a lower payment? An appraisal from Race Appraisal Services, LLC can help you get rid of your PMI.
It's widely known that a 20% down payment is common when getting a mortgage. Because the liability for the lender is generally only the remainder between the home value and the amount remaining on the loan, the 20% provides a nice cushion against the charges of foreclosure, reselling the home, and typical value variationson the chance that a borrower defaults.
During the recent mortgage upturn of the mid 2000s, it was widespread to see lenders requiring down payments of 10, 5 or often 0 percent. How does a lender manage the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower is unable to pay on the loan and the value of the property is less than the balance of the loan.
PMI is costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and often isn't even tax deductible. Opposite from a piggyback loan where the lender absorbs all the damages, PMI is lucrative for the lender because they obtain the money, and they receive payment if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homebuyer avoid paying PMI?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically stop the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Acute home owners can get off the hook sooner than expected. The law guarantees that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent.
It can take countless years to get to the point where the principal is just 20% of the original loan amount, so it's important to know how your home has increased in value. After all, every bit of appreciation you've achieved over time counts towards abolishing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Despite the fact that nationwide trends forecast decreasing home values, be aware that real estate is local. Your neighborhood may not be minding the national trends and/or your home could have gained equity before things simmered down.
The hardest thing for almost all home owners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can surely help. As appraisers, it's our job to keep up with the market dynamics of our area. At Race Appraisal Services, LLC, we know when property values have risen or declined. We're masters at pinpointing value trends in East Longmeadow, Hampden County and surrounding areas. When faced with data from an appraiser, the mortgage company will generally remove the PMI with little anxiety. At which time, the home owner 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.