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 usually the standard. Since the risk for the lender is often only the remainder between the home value and the amount outstanding on the loan, the 20% provides a nice buffer against the expenses of foreclosure, selling the home again, and regular value changeson the chance that a purchaser defaults.

During the recent mortgage boom of the mid 2000s, it became customary to see lenders taking down payments of 10, 5 or sometimes 0 percent. A lender is able to endure the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplementary plan guards the lender in case a borrower defaults on the loan and the value of the home is lower 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 is pricey to a borrower. Different from a piggyback loan where the lender consumes all the costs, PMI is money-making 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 can a homeowner prevent paying PMI?

The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law stipulates that, upon request of the homeowner, the PMI must be released when the principal amount equals only 80 percent. So, wise homeowners can get off the hook a little early.

Considering it can take many years to get to the point where the principal is just 20% of the original loan amount, it's crucial to know how your home has grown in value. After all, every bit of appreciation you've obtained over time counts towards removing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Even when nationwide trends forecast plunging home values, be aware that real estate is local. Your neighborhood might not be heeding the national trends and/or your home may have gained equity before things calmed down.

The toughest thing for almost all homeowners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can definitely help. It is an appraiser's job to understand the market dynamics of their area. At REVARI (Real Estate Valuation and Research Inc.), we're experts at determining 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 usually do away with the PMI with little trouble. At that time, the homeowner can retain the savings from that point on.

Want to learn more about PMI and the Homeowners Protection Act? Click this link:
Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year

Paying PMI?

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.

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