Let Tierney Appraisals help you decide if you can eliminate your PMI
A 20% down payment is typically the standard when purchasing a home. The lender's risk is usually only the remainder between the home value and the amount remaining on the loan, so the 20% supplies a nice buffer against the costs of foreclosure, reselling the home, and typical value variations on the chance that a purchaser is unable to pay.
During the recent mortgage upturn of the last decade, it became customary to see lenders commanding down payments of 10, 5 or even 0 percent. A lender is able to endure the increased risk of the low down payment with Private Mortgage Insurance or PMI. PMI guards the lender if a borrower doesn't pay on the loan and the worth of the property is lower than the loan balance.
PMI can be expensive to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and oftentimes isn't even tax deductible. It's favorable for the lender because they obtain the money, and they get the money if the borrower is unable to pay, unlike a piggyback loan where the lender absorbs all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homeowners can keep from bearing the expense of PMI
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Smart homeowners can get off the hook beforehand. The law designates that, at the request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent.
It can take many years to arrive at the point where the principal is only 20% of the initial amount of the loan, so it's essential to know how your home has appreciated in value. After all, every bit of appreciation you've acquired over the years counts towards abolishing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Even when 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 might have secured equity before things simmered down.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. It is an appraiser's job to understand the market dynamics of their area. At Tierney Appraisals, we're experts at pinpointing value trends in Beverly, Essex 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 trouble. At which time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: