Let The Welter Appraisal Group help you figure out if you can get rid of your PMI
It's generally understood that a 20% down payment is common when buying a house. Considering the liability 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 charges of foreclosure, selling the home again, and regular value variationsin the event a purchaser doesn't pay.
During the recent mortgage boom of the last decade, it was widespread to see lenders requiring down payments of 10, 5 or sometimes 0 percent. A lender is able to endure the additional risk of the low down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower is unable to pay on the loan and the worth of the property is less than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and many times isn't even tax deductible, PMI can be pricey to a borrower. It's beneficial for the lender because they acquire the money, and they receive payment if the borrower doesn't pay, opposite from a piggyback loan where the lender takes in all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home buyers keep from bearing the cost of PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically stop the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law pledges that, upon request of the home owner, the PMI must be dropped when the principal amount equals just 80 percent. So, wise homeowners can get off the hook a little early.
Because it can take many years to get to the point where the principal is just 20% of the original loan amount, it's crucial to know how your home has increased in value. After all, every bit of appreciation you've acquired over time 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 minding the national trends and/or your home may have secured equity before things calmed down, so even when nationwide trends predict plunging home values, you should realize that real estate is local.
The difficult thing for most home owners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can surely help. It is an appraiser's job to recognize the market dynamics of their area. At The Welter Appraisal Group, we know when property values have risen or declined. We're masters at identifying value trends in Oakhurst, Monmouth County and surrounding areas. Faced with data from an appraiser, the mortgage company will usually remove the PMI with little anxiety. At that 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: