Let Appraisal Network, Corp. help you discover if you can cancel your PMI
It's typically inferred that a 20% down payment is common when getting a mortgage. The lender's risk is oftentimes only the difference between the home value and the sum outstanding on the loan, so the 20% supplies a nice buffer against the costs of foreclosure, reselling the home, and natural value variations on the chance that a borrower is unable to pay.
During the recent mortgage upturn of the last decade, it was common to see lenders taking down payments of 10, 5 or often 0 percent. How does a lender handle the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower defaults on the loan and the market price of the house is lower than what the borrower still owes on the loan.
PMI is pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and frequently isn't even tax deductible. It's advantageous for the lender because they obtain the money, and they get paid if the borrower doesn't pay, unlike a piggyback loan where the lender takes in all the losses.
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 expense of PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law stipulates that, upon request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent. So, keen home owners can get off the hook a little early.
It can take countless years to arrive at the point where the principal is only 20% of the original amount borrowed, so it's necessary to know how your home has increased in value. After all, every bit of appreciation you've acquired over the years counts towards removing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not be reflecting the national trends and/or your home could have secured equity before things simmered down, so even when nationwide trends forecast decreasing home values, you should understand that real estate is local.
The difficult thing for most homeowners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can certainly help. It is an appraiser's job to keep up with the market dynamics of their area. At Appraisal Network, Corp., we know when property values have risen or declined. We're experts at identifying value trends in Westbury, Nassau County and surrounding areas. When faced with information from an appraiser, the mortgage company will generally eliminate the PMI with little effort. At that time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: