DAS Appraisals can help you remove your Private Mortgage Insurance
It's typically inferred that a 20% down payment is common when buying a house. Because the liability for the lender is usually only the remainder between the home value and the amount due on the loan, the 20% supplies a nice buffer against the expenses of foreclosure, reselling the home, and typical value variationson the chance that a borrower doesn't pay.
The market was accepting down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender endure the added risk of the small down payment? The answer 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 home is lower than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and generally isn't even tax deductible, PMI can be expensive to a borrower. Separate from a piggyback loan where the lender absorbs all the damages, PMI is advantageous for the lender because they obtain 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 owners refrain from paying PMI?
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law states that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, wise homeowners can get off the hook a little earlier.
Because it can take countless years to get to the point where the principal is only 20% of the initial amount borrowed, it's important to know how your home has increased in value. After all, all of the appreciation you've accomplished over the years counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% mark? Even when nationwide trends indicate plummeting home values, understand that real estate is local. Your neighborhood may not be following the national trends and/or your home may have secured equity before things cooled off.
The hardest thing for many homeowners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can surely help. 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 determining value trends in Suffern, Rockland County and surrounding areas. When faced with information from an appraiser, the mortgage company will most often eliminate the PMI with little anxiety. At which time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: