Let Tortorella Appraisals, Inc. help you figure out if you can cancel your PMI
A 20% down payment is typically the standard when buying a house. The lender's risk is generally only the remainder between the home value and the sum outstanding on the loan, so the 20% supplies a nice cushion against the costs of foreclosure, selling the home again, and typical value changes in the event a purchaser is unable to pay.
The market was accepting down payments down to 10, 5 and even 0 percent during the mortgage boom of the last decade. A lender is able to endure the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower is unable to pay on the loan and the worth of the property is lower than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and oftentimes isn't even tax deductible, PMI can be costly to a borrower. It's favorable for the lender because they obtain the money, and they receive payment if the borrower defaults, opposite from 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 can homeowners refrain from bearing the cost of PMI?
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Acute home owners can get off the hook beforehand. The law designates that, at the request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent.
It can take countless years to get to the point where the principal is just 20% of the original amount borrowed, so it's necessary to know how your home has increased in value. After all, any appreciation you've acquired over time counts towards abolishing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Your neighborhood might not be adhering to the national trends and/or your home might have acquired equity before things calmed down, so even when nationwide trends indicate falling home values, you should understand that real estate is local.
The difficult thing for most homeowners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can surely help. As appraisers, it's our job to recognize the market dynamics of our area. At Tortorella Appraisals, Inc., we're masters at pinpointing value trends in Kingston, Ulster County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will often cancel the PMI with little effort. 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: