Have equity in your home? Want a lower payment? An appraisal from The Welter Appraisal Group can help you get rid of your PMI.
When getting a mortgage, a 20% down payment is typically the standard. Because the liability for the lender is usually only the remainder between the home value and the sum outstanding on the loan, the 20% adds a nice cushion against the charges of foreclosure, selling the home again, and typical value fluctuationson the chance that a borrower doesn't pay.
During the recent mortgage upturn of the last decade, it was widespread to see lenders commanding down payments of 10, 5 or even 0 percent. A lender is able to manage the additional risk of the low down payment with Private Mortgage Insurance or PMI. This supplementary policy covers the lender if a borrower doesn't pay on the loan and the value of the property is less than what the borrower still owes on the loan.
PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and generally isn't even tax deductible. Opposite from a piggyback loan where the lender consumes all the damages, PMI is money-making for the lender because they obtain the money, and they receive payment 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 homebuyers prevent bearing the cost of PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law pledges that, upon request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent. So, acute homeowners can get off the hook ahead of time.
Considering it can take many years to reach the point where the principal is only 20% of the initial loan amount, it's crucial to know how your home has grown in value. After all, every bit of appreciation you've acquired over the years counts towards dismissing PMI. So why pay it after your loan balance has fallen below the 80% mark? Even when nationwide trends signify falling home values, be aware that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home might have acquired equity before things calmed down.
The hardest thing for many home owners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can surely help. It's 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 recognizing value trends in Oakhurst, Monmouth County and surrounding areas. Faced with figures from an appraiser, the mortgage company will often remove the PMI with little effort. At which time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: