Let REVARI (Real Estate Valuation and Research Inc.) help you figure out if you can eliminate your PMI
A 20% down payment is usually accepted when getting a mortgage. Considering the risk for the lender is usually only the remainder between the home value and the sum remaining on the loan, the 20% supplies a nice cushion against the expenses of foreclosure, selling the home again, and typical value changeson the chance that a purchaser doesn't pay.
The market was taking down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to endure the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI covers the lender if a borrower is unable to pay on the loan and the value of the house is lower than what the borrower still owes on the loan.
PMI can be costly to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and generally isn't even tax deductible. It's beneficial for the lender because they obtain the money, and they receive payment if the borrower is unable to pay, unlike a piggyback loan where the lender takes in all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home owners avoid paying PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Savvy homeowners can get off the hook ahead of time. The law designates that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent.
It can take countless years to get to the point where the principal is only 20% of the original amount of the loan, so it's essential to know how your home has grown in value. After all, every bit of appreciation you've acquired over time counts towards removing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Despite the fact that nationwide trends indicate plummeting home values, realize that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home might have secured equity before things settled down.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. As appraisers, it's our job to recognize the market dynamics of our 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 figures from an appraiser, the mortgage company will most often do away with the PMI with little effort. At that time, the homeowner can enjoy the savings from that point on.
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