Let Race Appraisal Services, LLC help you learn if you can get rid of your PMI
A 20% down payment is usually accepted when purchasing a home. The lender's liability is usually only the difference between the home value and the sum due on the loan, so the 20% provides a nice buffer against the expenses of foreclosure, reselling the home, and natural value changes in the event a borrower is unable to pay.
The market was accepting down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. This added plan guards the lender in the event a borrower defaults on the loan and the market price of the property is lower than what is owed on the loan.
PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and frequently isn't even tax deductible. Opposite from a piggyback loan where the lender takes in all the costs, PMI is beneficial for the lender because they obtain the money, and they get paid if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homeowner refrain from bearing the cost of PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Smart homeowners can get off the hook a little early. The law promises that, upon request of the home owner, the PMI must be dropped when the principal amount reaches only 80 percent.
Since it can take countless years to arrive at the point where the principal is just 20% of the original amount of the loan, it's necessary to know how your home has increased in value. After all, any appreciation you've gained over time counts towards abolishing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends forecast falling home values, realize that real estate is local. Your neighborhood may not be adopting the national trends and/or your home might have acquired 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 tough thing to know. It is an appraiser's job to understand the market dynamics of their area. At Race Appraisal Services, LLC, we know when property values have risen or declined. We're experts at determining value trends in East Longmeadow, Hampden County and surrounding areas. When faced with figures from an appraiser, the mortgage company will most often cancel the PMI with little anxiety. At which time, the home owner 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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