Have equity in your home? Want a lower payment? An appraisal from Tortorella Appraisals, Inc. can help you get rid of your PMI.
It's generally inferred that a 20% down payment is common when purchasing a home. Considering the risk for the lender is generally only the difference between the home value and the sum remaining on the loan, the 20% adds a nice buffer against the charges of foreclosure, selling the home again, and natural value variationsin the event a borrower is unable to pay.
The market was accepting down payments as low as 10, 5 and often 0 percent during the mortgage boom of the last decade. A lender is able to endure the additional risk of the low 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 the loan balance.
PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and often isn't even tax deductible. It's lucrative for the lender because they collect the money, and they get the money if the borrower is unable to pay, contradictory to 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 homebuyers prevent bearing the expense of PMI?
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Savvy home owners can get off the hook a little early. The law stipulates that, upon request of the home owner, the PMI must be released when the principal amount equals only 80 percent.
It can take countless years to arrive at the point where the principal is just 20% of the initial amount of the loan, so it's crucial to know how your home has grown in value. After all, any appreciation you've acquired over the years counts towards dismissing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Despite the fact that nationwide trends hint at plummeting home values, be aware that real estate is local. Your neighborhood may not be heeding the national trends and/or your home could have secured equity before things cooled off.
A certified, licensed real estate appraiser can help homeowners 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 Tortorella Appraisals, Inc., we know when property values have risen or declined. We're experts at identifying value trends in Kingston, Saratoga County and surrounding areas. Faced with data from an appraiser, the mortgage company will most often do away with the PMI with little trouble. At that 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: