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 generally inferred that a 20% down payment is the standard when purchasing a home. Considering the liability for the lender is usually only the remainder between the home value and the amount due on the loan, the 20% supplies a nice buffer against the charges of foreclosure, selling the home again, and typical value variationson the chance that a borrower defaults.
The market was accepting down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to endure the increased risk of the low down payment with Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower defaults on the loan and the market price of the house is less than what the borrower still owes on the loan.
PMI can be costly to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and generally isn't even tax deductible. Separate 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 doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can buyers refrain from bearing the cost of PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law stipulates that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, keen homeowners can get off the hook sooner than expected.
Considering it can take many years to get to the point where the principal is just 20% of the original amount of the loan, it's crucial to know how your home has grown in value. After all, every bit of appreciation you've gained over the years counts towards removing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Despite the fact that nationwide trends signify declining home values, understand that real estate is local. Your neighborhood might not be heeding the national trends and/or your home may have acquired equity before things calmed down.
The hardest thing for many home owners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can certainly help. It's an appraiser's job to understand the market dynamics of their area. At Quinsigamond Appraisal Services, we're experts at analyzing 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 eliminate the PMI with little anxiety. At which 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: