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.
It's widely known that a 20% down payment is the standard when getting a mortgage. The lender's risk is often only the remainder between the home value and the amount due on the loan, so the 20% provides a nice cushion against the charges of foreclosure, selling the home again, and typical value changes in the event a purchaser defaults.
Banks were taking down payments down to 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender handle the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This supplementary plan takes care of the lender in the event a borrower is unable to pay on the loan and the value of the home is less than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and generally isn't even tax deductible, PMI can be costly to a borrower. Unlike a piggyback loan where the lender consumes all the deficits, PMI is money-making for the lender because they obtain 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 homebuyer refrain from bearing the expense of PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law promises that, at the request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent. So, savvy homeowners can get off the hook ahead of time.
Because it can take countless years to arrive at the point where the principal is only 20% of the initial loan amount, it's necessary 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 pay it after your loan balance has fallen below the 80% threshold? Your neighborhood might not be following the national trends and/or your home could have acquired equity before things calmed down, so even when nationwide trends indicate declining home values, you should understand that real estate is local.
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 hard thing to know. It's 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 identifying value trends in Claremont, Sullivan County and surrounding areas. When faced with figures from an appraiser, the mortgage company will generally cancel the PMI with little trouble. At that time, the homeowner can relish the savings from that point on.
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