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 understood that a 20% down payment is accepted when purchasing a home. The lender's risk is usually only the difference between the home value and the amount outstanding on the loan, so the 20% provides a nice cushion against the costs of foreclosure, selling the home again, and typical value fluctuations on the chance that a purchaser doesn't pay.
Lenders were taking down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to endure the increased risk of the small down payment with Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower is unable to pay on the loan and the market price of the house is lower than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI can be costly to a borrower. It's favorable for the lender because they acquire the money, and they receive payment if the borrower doesn't pay, opposite from a piggyback loan where the lender consumes all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home buyers avoid paying PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Smart home owners can get off the hook beforehand. The law guarantees that, upon request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent.
It can take many years to reach the point where the principal is just 20% of the original amount borrowed, so it's essential 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 should you pay it after your loan balance has dropped below the 80% mark? Even when nationwide trends indicate plunging home values, be aware that real estate is local. Your neighborhood might not be heeding the national trends and/or your home might have gained equity before things calmed down.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. It is an appraiser's job to understand the market dynamics of their area. At Tortorella Appraisals, Inc., we know when property values have risen or declined. We're masters at pinpointing value trends in Kingston, Saratoga County and surrounding areas. Faced with information from an appraiser, the mortgage company will generally 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: