Let REVARI (Real Estate Valuation and Research Inc.) help you discover if you can cancel your PMI
When buying a house, a 20% down payment is usually the standard. Since the risk for the lender is generally only the remainder between the home value and the sum outstanding on the loan, the 20% provides a nice buffer against the costs of foreclosure, selling the home again, and typical value fluctuationsin the event a purchaser is unable to pay.
During the recent mortgage upturn of the last decade, it was widespread to see lenders requiring down payments of 10, 5 or sometimes 0 percent. A lender is able to manage the added risk of the small down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower is unable to pay on the loan and the market price of the home is lower than what is owed on the loan.
PMI can be expensive 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 profitable for the lender because they collect the money, and they get the money if the borrower doesn't pay, contradictory to a piggyback loan where the lender absorbs all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home owners can prevent 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 original loan amount. Acute home owners can get off the hook beforehand. The law guarantees that, at the request of the home owner, the PMI must be released when the principal amount reaches just 80 percent.
Considering it can take many years to get to the point where the principal is only 20% of the original loan amount, it's crucial to know how your home has increased in value. After all, all of the appreciation you've acquired over time counts towards removing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Even when nationwide trends signify plunging home values, understand that real estate is local. Your neighborhood might not be following the national trends and/or your home might have secured equity before things cooled off.
The difficult thing for most homeowners to know 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 REVARI (Real Estate Valuation and Research Inc.), we know when property values have risen or declined. We're masters at identifying value trends in Claremont, Sullivan County and surrounding areas. When faced with information from an appraiser, the mortgage company will usually remove the PMI with little trouble. 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:
Would you like to save money by not having to pay for Private Mortgage Insurance? We can help. Simply fill out the form below as completely as possible and we'll send you information on how to save PMI expenses, with no obligation to you. We guarantee your privacy.