Let Appraisal Advisors Group help you decide if you can get rid of your PMI
A 20% down payment is usually accepted when purchasing a home. Considering the liability for the lender is oftentimes only the difference between the home value and the amount due on the loan, the 20% adds a nice buffer against the charges of foreclosure, selling the home again, and typical value variationsin the event a borrower doesn't pay.
During the recent mortgage boom of the last decade, it was customary to see lenders commanding down payments of 10, 5 or even 0 percent. How does a lender manage the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This added policy guards the lender in case a borrower defaults on the loan and the market price of the house is lower than the loan balance.
PMI is pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and generally isn't even tax deductible. It's favorable for the lender because they acquire the money, and they get the money if the borrower doesn't pay, contradictory to a piggyback loan where the lender takes in all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home owners can keep from paying PMI
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law stipulates that, at the request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent. So, acute homeowners can get off the hook sooner than expected.
It can take countless years to get to the point where the principal is only 20% of the initial amount of the loan, so it's important to know how your home has increased in value. After all, any appreciation you've achieved over the years counts towards removing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Your neighborhood may not be reflecting the national trends and/or your home could have gained equity before things simmered down, so even when nationwide trends forecast plummeting home values, you should understand that real estate is local.
The difficult thing for most home owners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can surely help. It's an appraiser's job to keep up with the market dynamics of their area. At Appraisal Advisors Group, we know when property values have risen or declined. We're masters at recognizing value trends in Caguas, Caguas County and surrounding areas. When faced with data from an appraiser, the mortgage company will most often eliminate the PMI with little trouble. At which time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: