Have equity in your home? Want a lower payment? An appraisal from Tierney Appraisals can help you get rid of your PMI.
It's typically inferred that a 20% down payment is the standard when purchasing a home. The lender's risk is often only the difference between the home value and the amount outstanding on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and natural value variations on the chance that a borrower is unable to pay.
Lenders were working with 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 increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI guards the lender if a borrower is unable to pay on the loan and the value of the house is lower than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and frequently isn't even tax deductible, PMI can be pricey to a borrower. Unlike a piggyback loan where the lender takes in all the deficits, PMI is beneficial for the lender because they obtain the money, and they get paid 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 a buyer avoid bearing the cost of PMI?
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Savvy homeowners can get off the hook a little earlier. The law states that, upon request of the homeowner, the PMI must be released when the principal amount equals just 80 percent.
Since it can take countless years to reach 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, any appreciation you've obtained over time counts towards removing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold? Despite the fact that nationwide trends predict falling home values, be aware that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home could have secured equity before things settled down.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a tough thing to know. It's an appraiser's job to know the market dynamics of their area. At Tierney Appraisals, we know when property values have risen or declined. We're masters at determining value trends in Beverly, Essex County and surrounding areas. Faced with data from an appraiser, the mortgage company will often eliminate the PMI with little anxiety. At which time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: