Have equity in your home? Want a lower payment? An appraisal from Tierney Appraisals can help you get rid of your PMI.
When getting a mortgage, a 20% down payment is usually the standard. Because the risk for the lender is oftentimes only the remainder between the home value and the amount due on the loan, the 20% supplies a nice cushion against the costs of foreclosure, reselling the home, and typical value variationsin the event a purchaser defaults.
During the recent mortgage upturn of the mid 2000s, it was widespread to see lenders taking down payments of 10, 5 or often 0 percent. A lender is able to manage the additional risk of the small down payment with Private Mortgage Insurance or PMI. This supplementary policy protects the lender in the event a borrower defaults on the loan and the worth of the home is less than what is owed on the loan.
PMI is pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and often isn't even tax deductible. Contradictory to a piggyback loan where the lender consumes all the deficits, PMI is money-making for the lender because they obtain the money, and they get paid 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 owner avoid paying PMI?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Smart homeowners can get off the hook a little early. The law promises that, upon request of the home owner, the PMI must be released when the principal amount equals just 80 percent.
Considering it can take many years to reach the point where the principal is just 20% of the initial loan amount, it's crucial to know how your home has appreciated in value. After all, any appreciation you've gained over the years counts towards dismissing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood might not be adopting the national trends and/or your home may have acquired equity before things settled down, so even when nationwide trends predict declining home values, you should understand that real estate is local.
The toughest thing for many home owners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can definitely help. As appraisers, it's our job to recognize the market dynamics of our area. At Tierney Appraisals, we know when property values have risen or declined. We're masters at analyzing value trends in Beverly, Essex County and surrounding areas. When faced with data from an appraiser, the mortgage company will generally do away with the PMI with little trouble. At that 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: