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.
When buying a house, a 20% down payment is typically the standard. The lender's liability is often only the remainder between the home value and the sum outstanding on the loan, so the 20% adds a nice cushion against the costs of foreclosure, reselling the home, and regular value variations on the chance that a purchaser defaults.
The market was taking down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender endure the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower defaults on the loan and the worth of the home is lower than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and often isn't even tax deductible, PMI is pricey to a borrower. Opposite from a piggyback loan where the lender takes in all the costs, PMI is profitable for the lender because they acquire the money, and they get paid if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home owner keep from paying PMI?
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Wise home owners can get off the hook sooner than expected. The law promises that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent.
It can take many years to get to the point where the principal is just 20% of the original amount borrowed, so it's important to know how your home has grown in value. After all, every bit of appreciation you've accomplished over the years counts towards removing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Your neighborhood might not be following the national trends and/or your home could have secured equity before things cooled off, so even when nationwide trends forecast plunging home values, you should realize that real estate is local.
The toughest thing for almost all home owners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can surely help. As appraisers, it's our job to keep up with the market dynamics of our area. At REVARI (Real Estate Valuation and Research Inc.), we're experts at pinpointing value trends in Claremont, Sullivan County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will most often drop the PMI with little trouble. At that time, the homeowner can enjoy 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.