Let REVARI (Real Estate Valuation and Research Inc.) help you discover if you can eliminate your PMI
A 20% down payment is usually the standard when purchasing a home. The lender's risk is usually only the difference between the home value and the amount remaining on the loan, so the 20% provides a nice cushion against the costs of foreclosure, selling the home again, and natural value variations in the event a purchaser doesn't pay.
The market was working with down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. This additional plan takes care of the lender in case a borrower doesn't pay on the loan and the value of the home is lower than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and many times isn't even tax deductible, PMI can be expensive to a borrower. Contradictory to a piggyback loan where the lender takes in all the deficits, PMI is advantageous for the lender because they secure the money, and they receive payment 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 buyer prevent paying PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Wise home owners can get off the hook a little earlier. The law designates that, at the request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent.
Since it can take countless years to arrive at the point where the principal is only 20% of the original amount borrowed, it's important to know how your home has grown in value. After all, any appreciation you've accomplished over time counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends forecast declining home values, understand that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home could have acquired equity before things simmered down.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. As appraisers, it's our job to know 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 analyzing value trends in Claremont, Sullivan County and surrounding areas. Faced with information from an appraiser, the mortgage company will often cancel the PMI with little trouble. At that time, the home owner can delight in the savings from that point on.
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