Let The Welter Appraisal Group help you determine if you can get rid of your PMI
When buying a house, a 20% down payment is typically the standard. Considering 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 buffer against the expenses of foreclosure, reselling the home, and typical value variationsin the event a borrower doesn't pay.
During the recent mortgage boom of the mid 2000s, it became common to see lenders requiring down payments of 10, 5 or often 0 percent. A lender is able to endure the additional risk of the small down payment with Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower doesn't pay on the loan and the market price of the property is lower than the balance of the loan.
PMI can be expensive to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible. It's favorable for the lender because they acquire the money, and they get paid if the borrower is unable to pay, contradictory to a piggyback loan where the lender absorbs all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homeowners prevent bearing the cost of PMI?
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Wise home owners can get off the hook beforehand. The law stipulates that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent.
It can take many years to get to the point where the principal is only 20% of the initial amount of the loan, so it's necessary to know how your home has increased in value. After all, any appreciation you've gained over the years counts towards dismissing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Despite the fact that nationwide trends hint at plunging home values, realize that real estate is local. Your neighborhood might not be adopting the national trends and/or your home could have gained equity before things settled down.
The difficult thing for almost all home owners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can definitely help. It is an appraiser's job to understand 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 figures from an appraiser, the mortgage company will often cancel the PMI with little trouble. At which time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: