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 purchasing a home. The lender's risk is often only the remainder between the home value and the amount due on the loan, so the 20% provides a nice buffer against the expenses of foreclosure, selling the home again, and typical value variations in the event a borrower is unable to pay.
Banks were taking down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender handle the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This added plan covers the lender in the event a borrower defaults on the loan and the market price of the home is lower than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and often isn't even tax deductible, PMI is costly to a borrower. Different from a piggyback loan where the lender consumes all the costs, PMI is lucrative for the lender because they collect the money, and they receive payment 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 refrain from bearing the cost of PMI?
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law promises that, upon request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent. So, wise home owners can get off the hook sooner than expected.
It can take many years to reach the point where the principal is only 20% of the original loan amount, so it's important to know how your home has appreciated in value. After all, all of the appreciation you've gained over time counts towards abolishing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Even when nationwide trends predict falling home values, understand that real estate is local. Your neighborhood might not be heeding the national trends and/or your home could have gained equity before things simmered down.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. It's an appraiser's job to keep up with the market dynamics of their area. At Capraro Appraisal Company, Inc., we're experts at analyzing value trends in North Providence, Providence County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will usually remove the PMI with little effort. At which time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: