Have equity in your home? Want a lower payment? An appraisal from Sands Appraisal Service, Inc. can help you get rid of your PMI.
When purchasing a home, a 20% down payment is typically the standard. Considering the risk for the lender is often only the difference between the home value and the sum due on the loan, the 20% provides a nice buffer against the costs of foreclosure, reselling the home, and regular value fluctuationsin the event a borrower is unable to pay.
During the recent mortgage upturn of the last decade, it was customary to see lenders commanding down payments of 10, 5 or often 0 percent. How does a lender endure the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower defaults on the loan and the worth of the property is less than the loan balance.
PMI can be costly to a borrower on the grounds that 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 money-making for the lender because they secure the money, and they receive payment if the borrower defaults, unlike a piggyback loan where the lender takes in all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homebuyer keep from paying PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Smart home owners can get off the hook ahead of time. The law states that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent.
It can take countless years to reach the point where the principal is only 20% of the initial amount borrowed, so it's necessary to know how your home has increased in value. After all, all of the appreciation you've gained over the years counts towards dismissing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Despite the fact that nationwide trends forecast decreasing home values, realize that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home could have gained equity before things settled down.
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 hard thing to know. As appraisers, it's our job to know the market dynamics of our area. At Sands Appraisal Service, Inc., we're masters at pinpointing value trends in Succasunna, Morris County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will usually eliminate 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: