Have equity in your home? Want a lower payment? An appraisal from REVARI (Real Estate Valuation and Research Inc.) can help you get rid of your PMI.
A 20% down payment is usually the standard when buying a house. The lender's risk is often only the remainder between the home value and the sum remaining on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and natural value changes on the chance that a borrower doesn't pay.
Lenders were working with down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender manage the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI covers the lender if a borrower doesn't pay on the loan and the value of the home is less than what the borrower still owes on the loan.
PMI can be costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and oftentimes isn't even tax deductible. Unlike a piggyback loan where the lender consumes all the damages, PMI is lucrative for the lender because they secure the money, and they receive payment 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 home buyers can refrain from bearing the expense of PMI
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Smart home owners can get off the hook beforehand. The law pledges that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent.
Because it can take countless years to reach the point where the principal is just 20% of the initial loan amount, it's essential to know how your home has grown in value. After all, every bit of appreciation you've obtained over the years counts towards abolishing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Even when nationwide trends hint at falling home values, be aware that real estate is local. Your neighborhood might not be minding the national trends and/or your home might have secured equity before things settled 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 is an appraiser's job to know the market dynamics of their area. At REVARI (Real Estate Valuation and Research Inc.), we know when property values have risen or declined. We're experts at pinpointing value trends in Claremont, Sullivan County and surrounding areas. Faced with information from an appraiser, the mortgage company will usually drop the PMI with little effort. At that time, the home owner can relish the savings from that point on.
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