EXPRESS APPRAISAL GROUP, LLC can help you remove your Private Mortgage Insurance
It's widely inferred that a 20% down payment is the standard when buying a house. Because the risk for the lender is generally only the remainder between the home value and the sum remaining on the loan, the 20% provides a nice buffer against the charges of foreclosure, selling the home again, and typical value variationson the chance that a borrower doesn't pay.
Lenders were accepting down payments as low as 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. How does a lender handle the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower is unable to pay on the loan and the worth of the home is less 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 generally isn't even tax deductible, PMI can be expensive to a borrower. Contradictory to a piggyback loan where the lender takes in all the deficits, PMI is profitable for the lender because they secure the money, and they get the money if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a buyer avoid paying PMI?
The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Smart homeowners can get off the hook ahead of time. The law states that, at the request of the homeowner, the PMI must be released when the principal amount equals just 80 percent.
Because it can take many years to get to the point where the principal is only 20% of the original amount borrowed, it's necessary to know how your home has appreciated in value. After all, all of the appreciation you've acquired over time counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Your neighborhood might not be minding the national trends and/or your home may have acquired equity before things cooled off, so even when nationwide trends signify plunging home values, you should realize that real estate is local.
The toughest thing for most home owners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can surely help. As appraisers, it's our job to recognize the market dynamics of our area. At EXPRESS APPRAISAL GROUP, LLC, we're masters at recognizing value trends in KINNELON, Morris County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will often do away with 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: