REVARI (Real Estate Valuation and Research Inc.) can help you remove your Private Mortgage Insurance
It's typically inferred that a 20% down payment is the standard when getting a mortgage. The lender's risk is usually only the difference between the home value and the sum outstanding on the loan, so the 20% provides a nice cushion against the charges of foreclosure, selling the home again, and natural value changes on the chance that a purchaser defaults.
The market was accepting down payments down to 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. How does a lender handle the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This supplemental policy guards the lender in the event a borrower defaults on the loan and the market price of the house is less than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and many times isn't even tax deductible, PMI can be costly to a borrower. Unlike a piggyback loan where the lender consumes all the deficits, PMI is advantageous for the lender because they secure 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 homebuyers can keep from bearing the expense of PMI
The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law designates that, at the request of the home owner, the PMI must be released when the principal amount equals only 80 percent. So, keen homeowners can get off the hook a little early.
It can take many years to arrive at the point where the principal is only 20% of the initial amount borrowed, so it's essential to know how your home has grown in value. After all, any appreciation you've acquired over time counts towards removing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Even when nationwide trends indicate plunging home values, be aware that real estate is local. Your neighborhood may not be minding the national trends and/or your home may have secured equity before things cooled off.
The difficult 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. As appraisers, it's our job to understand the market dynamics of our area. At REVARI (Real Estate Valuation and Research Inc.), we know when property values have risen or declined. We're experts at recognizing value trends in Claremont, Sullivan County and surrounding areas. When faced with information from an appraiser, the mortgage company will often drop 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.