REVARI (Real Estate Valuation and Research Inc.) can help you remove your Private Mortgage Insurance
A 20% down payment is usually accepted when purchasing a home. The lender's liability is oftentimes only the remainder between the home value and the amount due on the loan, so the 20% adds a nice cushion against the expenses of foreclosure, selling the home again, and natural value variations on the chance that a borrower doesn't pay.
During the recent mortgage boom of the last decade, it was common to see lenders requiring down payments of 10, 5 or even 0 percent. How does a lender endure the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower doesn't pay on the loan and the worth of the property is lower than the balance of the loan.
PMI is costly to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and many times isn't even tax deductible. Contradictory to a piggyback loan where the lender consumes all the losses, PMI is favorable for the lender because they acquire the money, and they get the money if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homeowners refrain from bearing the cost of PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically stop the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law pledges that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent. So, acute homeowners can get off the hook a little early.
Because it can take many years to get to the point where the principal is only 20% of the initial amount borrowed, it's important to know how your home has appreciated in value. After all, all of the appreciation you've obtained over the years counts towards removing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Despite the fact that nationwide trends forecast plunging home values, understand that real estate is local. Your neighborhood may not be heeding the national trends and/or your home may have gained equity before things calmed down.
The toughest thing for most home owners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can surely help. It's an appraiser's job to understand the market dynamics of their area. At REVARI (Real Estate Valuation and Research Inc.), we're experts at analyzing value trends in Claremont, Sullivan County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will usually eliminate the PMI with little anxiety. At which time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link:
Would you like to save money by not having to pay for Private Mortgage Insurance? We can help. Simply fill out the form below as completely as possible and we'll send you information on how to save PMI expenses, with no obligation to you. We guarantee your privacy.