Have equity in your home? Want a lower payment? An appraisal from Tierney Appraisals can help you get rid of your PMI.
A 20% down payment is usually the standard when purchasing a home. The lender's risk is often only the difference between the home value and the sum remaining on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, reselling the home, and natural value variations in the event a borrower doesn't pay.
The market was working with down payments as low as 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. A lender is able to handle the increased risk of the low down payment with Private Mortgage Insurance or PMI. This supplementary policy protects the lender in the event a borrower doesn't pay on the loan and the market price of the house is lower than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and frequently isn't even tax deductible, PMI is costly to a borrower. Opposite from a piggyback loan where the lender absorbs all the damages, PMI is favorable for the lender because they acquire the money, and they receive payment 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 can home buyers keep from bearing the expense 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 original loan amount. Keen homeowners can get off the hook ahead of time. The law designates that, at the request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent.
Considering it can take many years to arrive at the point where the principal is just 20% of the original amount of the loan, it's necessary to know how your home has appreciated in value. After all, all of the appreciation you've accomplished 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 plummeting home values, realize that real estate is local. Your neighborhood may not be adopting the national trends and/or your home could have secured equity before things simmered down.
The difficult thing for almost all homeowners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can surely help. It's an appraiser's job to recognize the market dynamics of their area. At Tierney Appraisals, we're masters at determining value trends in Beverly, Essex County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will often do away with the PMI with little effort. 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: