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 accepted when purchasing a home. The lender's risk is generally only the difference between the home value and the amount remaining on the loan, so the 20% supplies a nice buffer against the costs of foreclosure, selling the home again, and natural value fluctuations on the chance that a borrower is unable to pay.
Banks were working with down payments as low as 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. How does a lender manage the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This additional policy guards the lender if a borrower doesn't pay on the loan and the worth of the property is less than the loan balance.
PMI is pricey to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible. It's profitable for the lender because they collect the money, and they get the money if the borrower is unable to pay, separate 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 homebuyers can keep from bearing the cost of PMI
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Wise home owners can get off the hook beforehand. The law pledges that, upon request of the home owner, the PMI must be dropped when the principal amount equals just 80 percent.
Because it can take countless years to reach the point where the principal is only 20% of the original amount of the loan, it's essential to know how your home has increased in value. After all, any appreciation you've obtained over time counts towards abolishing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Even when nationwide trends signify declining home values, understand that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home could have gained equity before things settled down.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. As appraisers, it's our job to know the market dynamics of our area. At Race Appraisal Services, LLC, we're masters at identifying value trends in East Longmeadow, Hampden County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will usually eliminate the PMI with little effort. At which time, the home owner can relish 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.