Let Tortorella Appraisals, Inc. help you discover if you can eliminate your PMI
When buying a house, a 20% down payment is usually the standard. The lender's risk is usually only the remainder between the home value and the sum due on the loan, so the 20% supplies a nice buffer against the costs of foreclosure, selling the home again, and typical value variations in the event a borrower is unable to pay.
During the recent mortgage upturn of the last decade, it was customary to see lenders taking down payments of 10, 5 or sometimes 0 percent. A lender is able to handle the additional risk of the small down payment with Private Mortgage Insurance or PMI. PMI protects the lender in the event a borrower defaults on the loan and the worth of the property is lower than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and frequently isn't even tax deductible, PMI is pricey to a borrower. It's favorable for the lender because they acquire the money, and they get the money if the borrower is unable to pay, separate from a piggyback loan where the lender absorbs all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homebuyers avoid paying PMI?
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the beginning 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, wise homeowners can get off the hook ahead of time.
Since it can take countless years to reach the point where the principal is just 20% of the initial loan amount, it's crucial to know how your home has increased in value. After all, all of the appreciation you've accomplished over time counts towards abolishing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends forecast plunging home values, be aware that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home might have secured equity before things settled down.
The hardest thing for most home owners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can definitely help. 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 recognizing value trends in Kingston, Saratoga County and surrounding areas. Faced with information from an appraiser, the mortgage company will usually do away with 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: