Tortorella Appraisals, Inc. can help you remove your Private Mortgage Insurance
When purchasing a home, a 20% down payment is typically the standard. Since the liability for the lender is generally only the remainder between the home value and the amount due on the loan, the 20% supplies a nice buffer against the costs of foreclosure, reselling the home, and natural value fluctuationson the chance that a borrower is unable to pay.
The market was taking down payments down to 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. How does a lender handle the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower is unable to pay on the loan and the worth of the house is lower than what the borrower still owes on the loan.
PMI can be costly to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and often isn't even tax deductible. Different from a piggyback loan where the lender absorbs all the losses, PMI is favorable for the lender because they collect the money, and they get the money if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can buyers avoid paying PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Keen homeowners can get off the hook beforehand. The law designates that, upon request of the home owner, the PMI must be released when the principal amount equals just 80 percent.
Because it can take many years to get to the point where the principal is only 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 achieved over time counts towards dismissing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood may not be reflecting the national trends and/or your home might have gained equity before things settled down, so even when nationwide trends hint at decreasing home values, you should understand that real estate is local.
A certified, licensed real estate appraiser can help home owners 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 keep up with the market dynamics of our area. At Tortorella Appraisals, Inc., we know when property values have risen or declined. We're masters at determining value trends in Kingston, Saratoga County and surrounding areas. Faced with figures from an appraiser, the mortgage company will usually remove the PMI with little effort. At that time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: