Let Race Appraisal Services, LLC help you decide if you can eliminate your PMI
It's widely understood that a 20% down payment is the standard when getting a mortgage. The lender's risk is often only the difference between the home value and the amount remaining on the loan, so the 20% provides a nice buffer against the expenses of foreclosure, reselling the home, and regular value changes on the chance that a borrower doesn't pay.
The market was taking down payments as low as 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. A lender is able to handle the added risk of the reduced down payment with Private Mortgage Insurance or PMI. This added plan guards the lender if a borrower defaults on the loan and the market price of the home is less than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and often isn't even tax deductible, PMI can be expensive to a borrower. It's profitable for the lender because they obtain the money, and they get the money if the borrower defaults, opposite from a piggyback loan where the lender consumes all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homebuyers prevent paying PMI?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically stop the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Savvy home owners can get off the hook beforehand. The law designates that, upon request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent.
Considering it can take many years to reach the point where the principal is just 20% of the initial loan amount, it's necessary to know how your home has appreciated in value. After all, every bit of appreciation you've obtained over time counts towards dismissing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Your neighborhood might not be adopting the national trends and/or your home could have secured equity before things calmed down, so even when nationwide trends signify falling home values, you should understand that real estate is local.
The hardest thing for almost all homeowners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can definitely help. It's an appraiser's job to recognize the market dynamics of their area. At Race Appraisal Services, LLC, we're experts at determining value trends in East Longmeadow, Hampden 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 usually drop the PMI with little effort. At that 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:
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.