Let Capraro Appraisal Company, Inc. help you determine if you can eliminate your PMI
When getting a mortgage, a 20% down payment is typically the standard. The lender's risk is usually only the difference between the home value and the amount due on the loan, so the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and typical value variations in the event a borrower defaults.
During the recent mortgage upturn of the last decade, it was widespread to see lenders taking down payments of 10, 5 or often 0 percent. A lender is able to handle the increased risk of the small down payment with Private Mortgage Insurance or PMI. This supplementary policy protects the lender if a borrower defaults on the loan and the market price of the house is lower than what is owed on the loan.
Because 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 pricey to a borrower. It's favorable for the lender because they acquire the money, and they receive payment if the borrower is unable to pay, separate from a piggyback loan where the lender consumes all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home owners keep from bearing the expense of PMI?
The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Wise home owners can get off the hook a little early. The law designates that, at the request of the home owner, the PMI must be dropped when the principal amount equals just 80 percent.
It can take many years to get to the point where the principal is only 20% of the initial amount of the loan, so it's crucial to know how your home has appreciated 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 your loan balance has fallen below the 80% threshold? Despite the fact that nationwide trends predict plummeting home values, realize that real estate is local. Your neighborhood may not be adopting the national trends and/or your home might have acquired equity before things settled down.
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. 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 masters at analyzing value trends in North Providence, Providence County and surrounding areas. Faced with figures from an appraiser, the mortgage company will generally eliminate the PMI with little trouble. At which time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: