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 getting a mortgage, a 20% down payment is typically the standard. The lender's liability is generally only the remainder between the home value and the amount due on the loan, so the 20% adds a nice buffer against the costs of foreclosure, selling the home again, and typical value variations on the chance that a borrower doesn't pay.
Banks were taking down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. This supplementary plan guards the lender in case a borrower is unable to pay on the loan and the value of the property is lower than what is owed on the loan.
PMI can be pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and oftentimes isn't even tax deductible. It's profitable for the lender because they secure the money, and they get the money if the borrower defaults, different from a piggyback loan where the lender consumes all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How buyers can refrain from paying PMI
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically cease the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law stipulates that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, keen home owners can get off the hook a little early.
Because it can take many years to get to the point where the principal is just 20% of the original loan amount, it's important to know how your home has grown in value. After all, all of the appreciation you've achieved over the years counts towards abolishing PMI. So why pay it after your loan balance has dropped below the 80% mark? Even when nationwide trends forecast plummeting home values, understand that real estate is local. Your neighborhood may not be following the national trends and/or your home might have secured equity before things calmed down.
The toughest thing for most home owners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can definitely help. As appraisers, it's our job to keep up with the market dynamics of our area. At Capraro Appraisal Company, Inc., we know when property values have risen or declined. We're masters at pinpointing value trends in North Providence, Providence County and surrounding areas. Faced with information from an appraiser, the mortgage company will usually do away with the PMI with little anxiety. At that time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: