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 the standard when getting a mortgage. The lender's risk is oftentimes only the difference between the home value and the amount outstanding on the loan, so the 20% provides a nice cushion against the charges of foreclosure, reselling the home, and regular value changes in the event a borrower doesn't pay.
During the recent mortgage upturn of the last decade, it was widespread to see lenders commanding down payments of 10, 5 or sometimes 0 percent. A lender is able to manage the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. This additional policy covers the lender in case a borrower defaults on the loan and the value of the home is less than what the borrower still owes on the loan.
PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and frequently isn't even tax deductible. It's favorable for the lender because they obtain the money, and they receive payment if the borrower doesn't pay, opposite from 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 a homebuyer avoid bearing the expense of PMI?
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law promises that, at the request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent. So, keen home owners can get off the hook a little earlier.
Because it can take many years to get to the point where the principal is just 20% of the initial amount borrowed, it's essential to know how your home has increased in value. After all, all of the appreciation you've gained over the years counts towards abolishing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not be heeding the national trends and/or your home may have gained equity before things simmered down, so even when nationwide trends indicate falling home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. As appraisers, it's our job to know the market dynamics of our 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. When faced with information from an appraiser, the mortgage company will usually remove the PMI with little trouble. At which time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: