LB Appraisals, Inc. can help you remove your Private Mortgage Insurance
When getting a mortgage, a 20% down payment is typically the standard. Considering the liability for the lender is often only the difference between the home value and the amount outstanding on the loan, the 20% provides a nice buffer against the costs of foreclosure, selling the home again, and regular value changeson the chance that a purchaser is unable to pay.
Lenders were taking down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to endure the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower doesn't pay on the loan and the worth of the property is less than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and often isn't even tax deductible, PMI can be pricey to a borrower. It's money-making for the lender because they secure the money, and they receive payment if the borrower doesn't pay, unlike a piggyback loan where the lender takes in all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home buyer prevent bearing the expense of PMI?
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law states that, at the request of the homeowner, the PMI must be released when the principal amount equals just 80 percent. So, smart homeowners can get off the hook a little early.
Because it can take countless years to get to the point where the principal is only 20% of the original amount of the loan, it's necessary to know how your home has grown in value. After all, any appreciation you've acquired over the years counts towards abolishing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Despite the fact that nationwide trends signify decreasing home values, realize that real estate is local. Your neighborhood might not be heeding the national trends and/or your home may have acquired equity before things calmed down.
The toughest thing for many home owners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can certainly help. It's an appraiser's job to know the market dynamics of their area. At LB Appraisals, Inc., we know when property values have risen or declined. We're experts at identifying value trends in Wayne, Passaic County and surrounding areas. Faced with information from an appraiser, the mortgage company will often drop the PMI with little effort. At that time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: