Have equity in your home? Want a lower payment? An appraisal from Capraro Appraisal Company, Inc. can help you get rid of your PMI.
A 20% down payment is usually accepted when buying a house. Since the liability for the lender is usually only the remainder between the home value and the sum due on the loan, the 20% adds a nice cushion against the costs of foreclosure, reselling the home, and typical value changeson the chance that a purchaser defaults.
The market was accepting down payments as low as 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. A lender is able to endure the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplemental plan covers the lender in the event a borrower is unable to pay on the loan and the worth of the home is less than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and many times isn't even tax deductible, PMI is costly to a borrower. Unlike a piggyback loan where the lender takes in all the deficits, PMI is lucrative for the lender because they collect the money, and they get the money if the borrower doesn't 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?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law designates that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent. So, savvy homeowners can get off the hook ahead of time.
Considering 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 grown in value. After all, any appreciation you've achieved over time counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Your neighborhood might not be adopting the national trends and/or your home could have secured equity before things simmered down, so even when nationwide trends hint at plunging home values, you should understand that real estate is local.
The toughest thing for many home owners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can definitely help. As appraisers, it's our job to know the market dynamics of our area. At Capraro Appraisal Company, Inc., we know when property values have risen or declined. We're experts at recognizing value trends in North Providence, Providence County and surrounding areas. When faced with data from an appraiser, the mortgage company will generally eliminate the PMI with little trouble. 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: