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. Since the liability for the lender is oftentimes only the difference between the home value and the amount due on the loan, the 20% provides a nice buffer against the costs of foreclosure, reselling the home, and regular value fluctuations on the chance that a purchaser doesn't pay.

During the recent mortgage upturn of the last decade, it was customary to see lenders making deals with down payments of 10, 5, 3 or often 0 percent. How does a lender endure the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This supplemental plan takes care of the lender if a borrower doesn't pay on the loan and the value of the property is lower than the loan balance.

Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and many times isn't even tax deductible, PMI can be expensive to a borrower. It's advantageous for the lender because they collect the money, and they get paid if the borrower is unable to pay, in contrast to a piggyback loan where the lender takes in all the costs.


Has your home value appreciated since you first purchased? Call Capraro Appraisal Company, Inc. today at (401) 353-5500. You may be able to cancel your Private Mortgage Insurance payment.

How home buyers can refrain from bearing the expense of PMI

The Homeowners Protection Act of 1998 requires the lenders on the majority of loans to automatically terminate the PMI when the principal balance of the loan reaches 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 only 80 percent. So, savvy homeowners can get off the hook a little earlier.

It can take several years to arrive at the point where the principal is just 80% of the original loan amount, so it's necessary to know how your Rhode Island home has grown in value. After all, every bit of appreciation you've achieved over the years counts towards abolishing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends indicate falling home values, understand that real estate is local. Your neighborhood might not be heeding the national trends and/or your home could have secured equity before things cooled off.

The difficult thing for most homeowners to determine is whether their home equity has exceeded the 20% point. An accredited, Rhode Island licensed real estate appraiser can certainly help. It's an appraiser's job to know the market dynamics of their area. At Capraro Appraisal Company, Inc., we know when property values have risen or declined. We're experts at identifying value trends in North Providence, Providence County, and surrounding areas. Faced with information from an appraiser, the mortgage company will most often drop the PMI with little effort. At that time, the home owner can enjoy the savings from that point on.


Has your real estate appreciated since you first purchased? Contact Capraro Appraisal Company, Inc. today at (401) 353-5500 to see if you can save money by removing your Private Mortgage Insurance payment.

Want to learn more about PMI and the Homeowners Protection Act? Click this link:

Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year

 


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