Let Palma-Lazar Appraisal help you determine if you can get rid of your PMI
When purchasing a home, a 20% down payment is usually the standard. Because the liability for the lender is usually only the remainder between the home value and the sum remaining on the loan, the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and typical value variationson the chance that a purchaser is unable to pay.
During the recent mortgage upturn of the last decade, it became widespread to see lenders commanding 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. PMI takes care of the lender in case a borrower is unable to pay on the loan and the worth of the house is lower than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI can be pricey to a borrower. It's lucrative for the lender because they secure the money, and they get the money if the borrower doesn't pay, different from a piggyback loan where the lender consumes all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homeowner refrain from paying PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Wise home owners can get off the hook a little early. The law promises that, at the request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent.
Considering it can take countless years to get to the point where the principal is just 20% of the original amount of the loan, it's crucial to know how your home has appreciated in value. After all, every bit of appreciation you've achieved over the years counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Even when nationwide trends forecast decreasing home values, understand that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home might have acquired equity before things calmed 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 is an appraiser's job to recognize the market dynamics of their area. At Palma-Lazar Appraisal, we're experts at analyzing value trends in Southampton, Bucks County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will often cancel the PMI with little effort. At which time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: