Have equity in your home? Want a lower payment? An appraisal from Quinsigamond Appraisal Services can help you get rid of your PMI.
A 20% down payment is usually the standard when getting a mortgage. The lender's liability is usually only the remainder between the home value and the amount outstanding on the loan, so the 20% supplies a nice buffer against the expenses of foreclosure, selling the home again, and regular value fluctuations on the chance that a borrower is unable to pay.
Banks were taking down payments down to 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 small down payment? The answer is Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower is unable to pay on the loan and the market price of the house is less than what the borrower still owes on the loan.
PMI can be expensive to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and oftentimes isn't even tax deductible. Unlike a piggyback loan where the lender consumes all the costs, PMI is beneficial for the lender because they collect the money, and they receive payment 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 buyers prevent bearing the cost of PMI?
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law stipulates that, upon request of the home owner, the PMI must be released when the principal amount reaches only 80 percent. So, acute home owners can get off the hook a little earlier.
Since it can take countless years to reach the point where the principal is only 20% of the initial loan amount, it's essential to know how your home has appreciated in value. After all, all of the appreciation you've achieved over the years counts towards removing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Your neighborhood might not be heeding the national trends and/or your home may have acquired equity before things calmed down, so even when nationwide trends signify decreasing home values, you should realize that real estate is local.
An accredited, 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's an appraiser's job to keep up with the market dynamics of their area. At Quinsigamond Appraisal Services, we're masters at determining value trends in Worcester, Worcester County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will often remove the PMI with little anxiety. At that time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: