Let Capraro Appraisal Company, Inc. help you determine if you can get rid of your PMI
It's widely known that a 20% down payment is accepted when getting a mortgage. Because the liability for the lender is oftentimes only the remainder between the home value and the sum due on the loan, the 20% supplies a nice cushion against the costs of foreclosure, reselling the home, and regular value variationsin the event a borrower doesn't pay.
The market was accepting down payments down to 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. How does a lender manage the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This additional policy guards the lender in the event a borrower doesn't pay on the loan and the value of the property is less than the loan balance.
PMI is pricey to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and frequently isn't even tax deductible. It's advantageous for the lender because they secure the money, and they get the money if the borrower doesn't pay, unlike a piggyback loan where the lender takes in all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home owner keep from bearing the expense of 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 equals 78 percent of the initial loan amount. The law designates that, at the request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent. So, wise homeowners can get off the hook a little earlier.
It can take countless years to reach the point where the principal is only 20% of the original loan amount, so it's necessary to know how your home has grown in value. After all, every bit of appreciation you've acquired over the years counts towards removing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% mark? Your neighborhood might not be following the national trends and/or your home might have secured equity before things calmed down, so even when nationwide trends predict decreasing home values, you should realize that real estate is local.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. It's an appraiser's job to recognize the market dynamics of their area. At Capraro Appraisal Company, Inc., we know when property values have risen or declined. We're experts at determining value trends in North Providence, Providence County and surrounding areas. When faced with data from an appraiser, the mortgage company will usually drop the PMI with little trouble. At which time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: