Have equity in your home? Want a lower payment? An appraisal from Capraro Appraisal Company, Inc. can help you get rid of your PMI.
When purchasing a home, a 20% down payment is usually the standard. Considering the risk for the lender is usually only the difference between the home value and the sum outstanding on the loan, the 20% provides a nice cushion against the charges of foreclosure, selling the home again, and typical value variationsin the event a purchaser doesn't pay.
During the recent mortgage boom of the last decade, it was customary to see lenders taking down payments of 10, 5 or often 0 percent. A lender is able to handle the added risk of the small down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower is unable to pay on the loan and the market price of the property is less than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and frequently isn't even tax deductible, PMI is pricey to a borrower. Different from a piggyback loan where the lender consumes all the losses, PMI is advantageous for the lender because they acquire 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 homeowners refrain from paying PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically stop the PMI when the principal balance of the loan equals 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 only 80 percent. So, savvy home owners can get off the hook a little earlier.
Since it can take many years to arrive at the point where the principal is just 20% of the initial amount of the loan, it's necessary to know how your home has increased in value. After all, every bit of appreciation you've obtained over time counts towards abolishing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Despite the fact that nationwide trends forecast declining home values, realize 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 simmered down.
The hardest thing for many home owners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. As appraisers, it's our job to understand the market dynamics of our area. At Capraro Appraisal Company, Inc., we're masters at analyzing value trends in North Providence, Providence County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will most often remove the PMI with little anxiety. At which 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: