Let Appraisal Advisors Group help you discover if you can get rid of your PMI
When purchasing a home, a 20% down payment is typically the standard. The lender's risk is often only the remainder between the home value and the sum outstanding on the loan, so the 20% supplies a nice cushion against the expenses of foreclosure, selling the home again, and regular value variations on the chance that a purchaser defaults.
Lenders were taking down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to endure the increased risk of the low down payment with Private Mortgage Insurance or PMI. PMI guards the lender if a borrower doesn't pay on the loan and the value of the home is lower than the balance of the loan.
PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and many times isn't even tax deductible. Opposite from a piggyback loan where the lender consumes all the costs, PMI is profitable for the lender because they secure the money, and they get paid if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home buyers prevent bearing the cost of PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law designates that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, smart home owners can get off the hook a little early.
It can take many years to arrive at the point where the principal is just 20% of the original amount of the loan, so it's essential to know how your home has grown in value. After all, every bit of appreciation you've acquired over the years counts towards abolishing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Even when nationwide trends indicate plunging home values, be aware that real estate is local. Your neighborhood may not be adopting the national trends and/or your home may have gained equity before things settled down.
The difficult thing for most home owners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. It's an appraiser's job to know the market dynamics of their area. At Appraisal Advisors Group, we're masters at analyzing value trends in Caguas, Caguas County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will generally remove the PMI with little effort. At that time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: