Let EXPRESS APPRAISAL GROUP, LLC help you figure out if you can eliminate your PMI
When buying a house, a 20% down payment is typically the standard. The lender's liability is generally 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 natural value variations in the event a purchaser defaults.
Banks were working with down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to endure the added risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower doesn't pay on the loan and the market price of the home is lower than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI is costly to a borrower. Contradictory to a piggyback loan where the lender absorbs all the losses, PMI is money-making for the lender because they secure the money, and they receive payment 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 homebuyer prevent paying PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law pledges that, upon request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent. So, savvy home owners can get off the hook ahead of time.
Considering it can take many years to reach the point where the principal is only 20% of the initial amount of the loan, it's essential to know how your home has grown in value. After all, all of the appreciation you've accomplished over the years counts towards removing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends predict falling home values, be aware that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home may have gained equity before things calmed down.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. It's an appraiser's job to know the market dynamics of their area. At EXPRESS APPRAISAL GROUP, LLC, we know when property values have risen or declined. We're experts at pinpointing value trends in KINNELON, Morris County and surrounding areas. When faced with information from an appraiser, the mortgage company will often cancel the PMI with little anxiety. At that time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: