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 typically the standard when buying a house. Considering the liability for the lender is often only the remainder between the home value and the amount outstanding on the loan, the 20% provides a nice cushion against the charges of foreclosure, selling the home again, and natural value changesin the event a borrower is unable to pay.
The market was working with down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the added risk of the low down payment with Private Mortgage Insurance or PMI. This supplementary policy takes care of the lender in case a borrower doesn't pay on the loan and the market price of the house is less than the balance of the loan.
PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and often isn't even tax deductible. Opposite from a piggyback loan where the lender takes in all the costs, PMI is favorable for the lender because they acquire the money, and they get the money if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home owners prevent bearing the cost of PMI?
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Wise homeowners can get off the hook sooner than expected. The law promises that, at the request of the homeowner, the PMI must be released when the principal amount equals just 80 percent.
Because it can take many years to arrive at the point where the principal is only 20% of the initial amount borrowed, it's essential 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 the balance of your loan has dropped below the 80% threshold? Your neighborhood may not be adopting the national trends and/or your home may have acquired equity before things cooled off, so even when nationwide trends forecast plunging home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. It is an appraiser's job to understand 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. When faced with data from an appraiser, the mortgage company will usually do away with the PMI with little anxiety. At which time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: