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. Because the liability for the lender is usually only the difference between the home value and the amount due on the loan, the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and regular value changesin the event a borrower is unable to pay.
During the recent mortgage upturn of the last decade, it was widespread to see lenders requiring down payments of 10, 5 or often 0 percent. A lender is able to handle the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower is unable to pay on the loan and the value of the home is less than the balance of the loan.
PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and often isn't even tax deductible. It's beneficial for the lender because they collect the money, and they get paid if the borrower defaults, different from 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 a home owner avoid bearing the cost of PMI?
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law pledges that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent. So, smart homeowners can get off the hook ahead of time.
Because it can take many years to arrive at the point where the principal is only 20% of the initial amount of the loan, it's important to know how your home has increased in value. After all, any appreciation you've accomplished over the years counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Despite the fact that nationwide trends signify falling home values, realize that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home might have acquired equity before things cooled off.
The hardest thing for most homeowners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can certainly 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. Faced with data from an appraiser, the mortgage company will most often eliminate the PMI with little effort. 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.