Let Race Appraisal Services, LLC help you figure out if you can get rid of your PMI
A 20% down payment is typically accepted when purchasing a home. The lender's liability is oftentimes only the remainder between the home value and the amount due on the loan, so the 20% provides a nice cushion against the charges of foreclosure, selling the home again, and natural value fluctuations on the chance that a borrower doesn't pay.
Banks were taking down payments down to 10, 5 and even 0 percent during the mortgage boom of the last decade. A lender is able to handle the additional risk of the low down payment with Private Mortgage Insurance or PMI. This additional plan covers the lender in the event a borrower defaults on the loan and the market price of the house is lower than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and generally isn't even tax deductible, PMI is pricey to a borrower. Different from a piggyback loan where the lender absorbs all the damages, PMI is beneficial for the lender because they secure the money, and they get paid if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homebuyers avoid paying PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Keen homeowners can get off the hook ahead of time. The law states that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent.
It can take many years to get to the point where the principal is only 20% of the original loan amount, so it's necessary to know how your home has grown in value. After all, every bit of appreciation you've gained over time counts towards removing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Your neighborhood may not be adhering to the national trends and/or your home could have gained equity before things cooled off, so even when nationwide trends hint at plunging home values, you should understand that real estate is local.
The hardest thing for many home owners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can surely help. It is an appraiser's job to know the market dynamics of their area. At Race Appraisal Services, LLC, we're masters 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 figures from an appraiser, the mortgage company will generally cancel the PMI with little effort. At which time, the homeowner 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.