Let Robert Pasacrita Appraisals help you discover if you can get rid of your PMI
It's typically understood that a 20% down payment is common when purchasing a home. Considering the risk for the lender is often only the difference between the home value and the amount outstanding on the loan, the 20% supplies a nice cushion against the expenses of foreclosure, reselling the home, and regular value changesin the event a purchaser is unable to pay.
During the recent mortgage boom of the last decade, it became common to see lenders taking down payments of 10, 5 or even 0 percent. How does a lender handle the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplemental plan covers the lender in case a borrower is unable to pay on the loan and the value of the house is less than what the borrower still owes on the loan.
PMI is pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and oftentimes isn't even tax deductible. Contradictory to a piggyback loan where the lender absorbs all the deficits, PMI is favorable for the lender because they acquire 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 homebuyers can prevent bearing the expense of PMI
The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law promises that, at the request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent. So, smart home owners can get off the hook a little early.
Because it can take countless years to reach the point where the principal is only 20% of the original loan amount, it's necessary to know how your home has grown in value. After all, every bit of appreciation you've acquired over time counts towards dismissing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not be heeding the national trends and/or your home could have secured equity before things simmered down, so even when nationwide trends predict falling home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. As appraisers, it's our job to understand the market dynamics of our area. At Robert Pasacrita Appraisals, we're experts at recognizing value trends in Yorktown Hts, Westchester 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 generally cancel the PMI with little anxiety. At that 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: