Have equity in your home? Want a lower payment? An appraisal from Quinsigamond Appraisal Services can help you get rid of your PMI.
When getting a mortgage, a 20% down payment is typically the standard. The lender's liability is often only the difference between the home value and the sum outstanding on the loan, so the 20% provides a nice cushion against the charges of foreclosure, reselling the home, and natural value changes on the chance that a borrower defaults.
Lenders were working with down payments as low as 10, 5 and often 0 percent during the mortgage boom of the last decade. A lender is able to manage the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower doesn't pay on the loan and the value of the property is lower than the balance of the loan.
PMI is pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and many times isn't even tax deductible. Separate from a piggyback loan where the lender absorbs all the damages, PMI is favorable for the lender because they collect the money, and they get the money 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 buyers can prevent bearing the cost of PMI
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically cease the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Acute homeowners can get off the hook beforehand. The law guarantees that, at the request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent.
Because it can take countless years to arrive at the point where the principal is just 20% of the original amount of the loan, it's essential to know how your home has increased in value. After all, all of the appreciation you've achieved over the years counts towards abolishing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Even when nationwide trends hint at declining home values, understand that real estate is local. Your neighborhood may not be following the national trends and/or your home might have secured equity before things cooled off.
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 is an appraiser's job to understand the market dynamics of their area. At Quinsigamond Appraisal Services, we know when property values have risen or declined. We're experts at recognizing value trends in Worcester, Worcester County and surrounding areas. Faced with data from an appraiser, the mortgage company will generally drop the PMI with little effort. 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: