Let Tierney Appraisals help you discover if you can eliminate your PMI
When getting a mortgage, a 20% down payment is usually the standard. Considering the liability for the lender is usually only the difference between the home value and the sum due on the loan, the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and natural value fluctuationson the chance that a borrower defaults.
During the recent mortgage upturn of the last decade, it became customary to see lenders commanding down payments of 10, 5 or sometimes 0 percent. A lender is able to endure the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower doesn't pay on the loan and the market price of the home is less than the balance of the loan.
PMI is pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and many times isn't even tax deductible. Opposite from a piggyback loan where the lender takes in all the damages, PMI is profitable for the lender because they acquire the money, and they receive payment 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 a home buyer refrain from bearing the expense of PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law stipulates that, upon request of the homeowner, the PMI must be released when the principal amount equals just 80 percent. So, acute homeowners can get off the hook sooner than expected.
It can take countless years to reach the point where the principal is only 20% of the original 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 what's the reason for paying it after your loan balance has dropped below the 80% threshold? Your neighborhood may not be reflecting the national trends and/or your home may have acquired equity before things simmered down, so even when nationwide trends forecast plummeting home values, you should realize that real estate is local.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. As appraisers, it's our job to know the market dynamics of our area. At Tierney Appraisals, we're experts at recognizing value trends in Beverly, Essex County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will most often eliminate the PMI with little trouble. At which time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: