Have equity in your home? Want a lower payment? An appraisal from Peabody Allied Appraisers can help you get rid of your PMI.
It's largely known that a 20% down payment is the standard when getting a mortgage. Since the risk for the lender is generally only the difference between the home value and the amount due on the loan, the 20% supplies a nice cushion against the costs of foreclosure, reselling the home, and regular value fluctuationsin the event a purchaser is unable to pay.
The market was working with down payments down to 10, 5 and even 0 percent during the mortgage boom of the last decade. How does a lender handle the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This additional plan guards the lender if a borrower doesn't pay on the loan and the worth of the home is lower than the loan balance.
PMI is costly to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and generally isn't even tax deductible. It's lucrative for the lender because they acquire the money, and they get the money if the borrower defaults, opposite from a piggyback loan where the lender absorbs 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 buyers keep from paying PMI?
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law states that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, acute home owners can get off the hook a little earlier.
It can take many years to get to the point where the principal is just 20% of the original amount of the loan, so it's crucial to know how your home has increased in value. After all, all of the appreciation you've obtained over the years counts towards removing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not be reflecting the national trends and/or your home might have gained equity before things calmed down, so even when nationwide trends forecast declining home values, you should realize that real estate is local.
A certified licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At Peabody Allied Appraisers, we know when property values have risen or declined. We're capable in determining value trends in Essex and Middlesex Counties and surrounding areas. Faced with information from an appraiser, the mortgage company will most often eliminate the PMI with little effort. At which time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: