Capraro Appraisal Company, Inc. can help you remove your Private Mortgage Insurance
It's widely known that a 20% down payment is the standard when purchasing a home. Because the liability for the lender is often only the remainder between the home value and the amount remaining on the loan, the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and natural value changeson the chance that a purchaser doesn't pay.
During the recent mortgage boom of the last decade, it was widespread to see lenders taking down payments of 10, 5 or sometimes 0 percent. How does a lender manage the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This supplemental policy takes care of the lender in case a borrower is unable to pay on the loan and the market price of the home is lower than the balance of the loan.
PMI is pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and often isn't even tax deductible. Different from a piggyback loan where the lender takes in all the costs, PMI is beneficial for the lender because they acquire the money, and they get the money 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 home buyers can refrain from paying PMI
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law promises that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent. So, keen homeowners can get off the hook a little earlier.
Because it can take many years to reach the point where the principal is just 20% of the original loan amount, it's essential to know how your home has appreciated in value. After all, all of the appreciation you've accomplished over the years counts towards dismissing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Your neighborhood might not be adhering to the national trends and/or your home may have acquired equity before things simmered down, so even when nationwide trends forecast plummeting home values, you should understand that real estate is local.
The toughest thing for many home owners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can surely help. As appraisers, it's our job to understand the market dynamics of our area. At Capraro Appraisal Company, Inc., we know when property values have risen or declined. We're experts at pinpointing value trends in North Providence, Providence County and surrounding areas. Faced with data from an appraiser, the mortgage company will most often eliminate 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: