Have equity in your home? Want a lower payment? An appraisal from REVARI (Real Estate Valuation and Research Inc.) can help you get rid of your PMI.
It's widely understood that a 20% down payment is accepted when buying a house. Since the liability for the lender is usually only the difference between the home value and the amount outstanding on the loan, the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and typical value fluctuationson the chance that a purchaser doesn't pay.
During the recent mortgage upturn of the last decade, it became widespread to see lenders taking down payments of 10, 5 or even 0 percent. How does a lender endure the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This supplementary plan guards the lender in case a borrower doesn't pay on the loan and the value of the house is less than what the borrower still owes on the loan.
PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and often isn't even tax deductible. It's favorable for the lender because they secure the money, and they get the money if the borrower defaults, unlike 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 home owners can keep from bearing the cost of PMI
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law pledges that, upon request of the home owner, the PMI must be released when the principal amount reaches only 80 percent. So, keen 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 initial amount of the loan, so it's essential to know how your home has increased in value. After all, every bit of appreciation you've accomplished over the years counts towards dismissing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Despite the fact that nationwide trends indicate declining home values, understand that real estate is local. Your neighborhood might not be minding the national trends and/or your home might have gained equity before things calmed down.
The toughest thing for many homeowners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can certainly help. It's an appraiser's job to know the market dynamics of their area. At REVARI (Real Estate Valuation and Research Inc.), we're experts at identifying value trends in Claremont, Sullivan County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will often remove the PMI with little trouble. At that time, the homeowner can delight in the savings from that point on.
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