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.
A 20% down payment is typically accepted when purchasing a home. The lender's risk is oftentimes only the difference between the home value and the amount due on the loan, so the 20% provides a nice buffer against the expenses of foreclosure, selling the home again, and typical value variations on the chance that a borrower is unable to pay.
During the recent mortgage upturn of the last decade, it became customary to see lenders requiring down payments of 10, 5 or even 0 percent. A lender is able to manage the additional risk of the small down payment with Private Mortgage Insurance or PMI. This supplemental plan takes care of the lender in case a borrower doesn't pay on the loan and the market price of the house is lower than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and frequently isn't even tax deductible, PMI can be expensive to a borrower. Different from a piggyback loan where the lender absorbs all the damages, PMI is profitable for the lender because they secure the money, and they get paid if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home owners can avoid paying PMI
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Wise homeowners can get off the hook a little early. The law promises that, upon request of the home owner, the PMI must be released when the principal amount reaches only 80 percent.
It can take countless years to arrive at the point where the principal is only 20% of the original loan amount, so it's crucial to know how your home has increased in value. After all, all of the appreciation you've obtained over time counts towards abolishing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Even when nationwide trends hint at plummeting home values, understand that real estate is local. Your neighborhood may not be adopting the national trends and/or your home might have acquired equity before things cooled off.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. It is an appraiser's job to keep up with the market dynamics of their area. At REVARI (Real Estate Valuation and Research Inc.), we know when property values have risen or declined. We're masters at pinpointing value trends in Claremont, Sullivan County and surrounding areas. Faced with figures from an appraiser, the mortgage company will usually remove the PMI with little anxiety. At which time, the homeowner can retain the savings from that point on.
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