Have equity in your home? Want a lower payment? An appraisal from Tortorella Appraisals, Inc. can help you get rid of your PMI.
A 20% down payment is typically accepted when buying a house. The lender's risk is often only the remainder between the home value and the amount due on the loan, so the 20% supplies a nice buffer against the charges of foreclosure, reselling the home, and natural value fluctuations on the chance that a purchaser defaults.
During the recent mortgage upturn of the mid 2000s, it became common to see lenders requiring down payments of 10, 5 or sometimes 0 percent. How does a lender endure the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower doesn't pay on the loan and the market price of the home is lower than what is owed on the loan.
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 is costly to a borrower. It's beneficial for the lender because they collect the money, and they get the money if the borrower defaults, separate from a piggyback loan where the lender consumes 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 buyers can prevent paying PMI
The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law designates that, at the request of the homeowner, the PMI must be released when the principal amount equals only 80 percent. So, acute home owners can get off the hook ahead of time.
Considering it can take countless years to arrive at the point where the principal is just 20% of the initial loan amount, it's crucial to know how your home has grown in value. After all, every bit of appreciation you've obtained over time counts towards dismissing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood might not be minding the national trends and/or your home might have secured equity before things calmed down, so even when nationwide trends predict plunging 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 rises above the 20% point, as it's a hard thing to know. It is an appraiser's job to know the market dynamics of their area. At Tortorella Appraisals, Inc., we know when property values have risen or declined. We're experts at analyzing value trends in Kingston, Saratoga County and surrounding areas. When faced with data from an appraiser, the mortgage company will often do away with the PMI with little trouble. At which time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: