DAS Appraisals can help you remove your Private Mortgage Insurance
It's typically inferred that a 20% down payment is common when purchasing a home. The lender's liability is generally only the remainder between the home value and the amount outstanding on the loan, so the 20% supplies a nice buffer against the expenses of foreclosure, selling the home again, and typical value variations in the event a purchaser defaults.
Banks were taking down payments as low as 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. How does a lender manage the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI covers the lender if a borrower defaults on the loan and the worth of the home is lower than what is owed on the loan.
PMI is costly to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and many times isn't even tax deductible. Unlike a piggyback loan where the lender absorbs all the costs, PMI is lucrative for the lender because they collect the money, and they receive payment if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home buyers keep from paying PMI?
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically terminate 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 homeowner, the PMI must be dropped when the principal amount reaches just 80 percent. So, acute homeowners 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 of the loan, so it's crucial to know how your home has appreciated in value. After all, all of the appreciation you've gained over time counts towards dismissing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends predict falling home values, realize that real estate is local. Your neighborhood may not be minding the national trends and/or your home might have acquired equity before things cooled off.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. As appraisers, it's our job to know the market dynamics of our area. At DAS Appraisals, we know when property values have risen or declined. We're masters at analyzing value trends in Hackensack, Rockland County and surrounding areas. Faced with data from an appraiser, the mortgage company will generally cancel the PMI with little effort. At that time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: