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 buying a house, a 20% down payment is typically the standard. The lender's liability is often only the difference between the home value and the sum remaining on the loan, so the 20% provides a nice cushion against the costs of foreclosure, reselling the home, and regular value variations in the event a purchaser defaults.
During the recent mortgage upturn of the mid 2000s, it was common to see lenders requiring down payments of 10, 5 or even 0 percent. How does a lender endure the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower doesn't pay on the loan and the worth of the home is less than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and often isn't even tax deductible, PMI can be expensive to a borrower. It's beneficial for the lender because they collect the money, and they get paid if the borrower is unable to pay, contradictory to 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 homebuyers can prevent bearing the cost of PMI
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law guarantees that, at the request of the home owner, the PMI must be released when the principal amount equals only 80 percent. So, savvy home owners can get off the hook ahead of time.
It can take many years to arrive at the point where the principal is just 20% of the original amount of the loan, so it's necessary to know how your home has increased in value. After all, any appreciation you've gained over time counts towards removing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Your neighborhood may not be reflecting the national trends and/or your home may have acquired equity before things settled down, so even when nationwide trends predict plunging home values, you should realize that real estate is local.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a tough thing to know. It's an appraiser's job to recognize the market dynamics of their area. At Race Appraisal Services, LLC, we're experts at recognizing value trends in East Longmeadow, Hampden County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will generally remove the PMI with little trouble. At that time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link:
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