Let The Welter Appraisal Group help you learn if you can eliminate your PMI
It's widely known that a 20% down payment is accepted when getting a mortgage. Since the risk for the lender is generally only the difference between the home value and the amount due on the loan, the 20% adds a nice cushion against the costs of foreclosure, reselling the home, and regular value variationsin the event a borrower defaults.
Banks were taking down payments as low as 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender endure the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This supplementary plan takes care of the lender if a borrower doesn't pay on the loan and the worth of the house is less than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and many times isn't even tax deductible, PMI is pricey to a borrower. It's beneficial for the lender because they collect the money, and they get the money if the borrower doesn't pay, unlike a piggyback loan where the lender consumes all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home buyers can avoid paying PMI
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law pledges that, at the request of the homeowner, the PMI must be released when the principal amount equals just 80 percent. So, keen home owners can get off the hook a little early.
It can take countless years to arrive at the point where the principal is only 20% of the initial amount borrowed, so it's important to know how your home has appreciated in value. After all, every bit of appreciation you've acquired over the years counts towards abolishing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood might not be reflecting the national trends and/or your home could have acquired equity before things cooled off, so even when nationwide trends hint at falling home values, you should understand that real estate is local.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. It's 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 analyzing value trends in Oakhurst, Monmouth County and surrounding areas. When faced with information from an appraiser, the mortgage company will usually drop 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: