Have equity in your home? Want a lower payment? An appraisal from Quinsigamond Appraisal Services can help you get rid of your PMI.
It's typically known that a 20% down payment is accepted when purchasing a home. The lender's risk is often only the difference between the home value and the sum due on the loan, so the 20% provides a nice buffer against the expenses of foreclosure, reselling the home, and natural value fluctuations on the chance that a purchaser doesn't pay.
The market was accepting 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 increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI protects the lender if a borrower doesn't pay on the loan and the worth of the property is less than the loan balance.
PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and many times isn't even tax deductible. Different from a piggyback loan where the lender consumes all the losses, PMI is lucrative for the lender because they obtain 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 can a home owner keep from bearing the expense of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically stop 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 sooner than expected. The law promises that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent.
It can take many years to reach the point where the principal is just 20% of the initial amount of the loan, so it's necessary to know how your home has appreciated in value. After all, any appreciation you've acquired over the years counts towards dismissing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends signify plummeting home values, be aware that real estate is local. Your neighborhood might not be following the national trends and/or your home may have acquired equity before things simmered down.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. It is an appraiser's job to keep up with the market dynamics of their area. At Quinsigamond Appraisal Services, we're masters at pinpointing value trends in Worcester, Worcester County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will often do away with the PMI with little anxiety. At which 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: