Let Capraro Appraisal Company, Inc. help you determine if you can eliminate your PMI

It's widely inferred that a 20% down payment is the standard when buying a house. Since the liability for the lender is often only the difference between the home value and the amount outstanding on the loan, the 20% supplies a nice cushion against the expenses of foreclosure, selling the home again, and typical value fluctuations in the event a borrower is unable to pay.

During the recent mortgage boom of the mid 2000s, it became customary to see lenders making deals with down payments of 10, 5, 3 or even 0 percent. A lender is able to endure the added risk of the small down payment with Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower defaults on the loan and the market price of the home is lower than what is owed on the loan.

PMI can be expensive to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and frequently isn't even tax deductible. It's money-making for the lender because they secure the money, and they are covered if the borrower defaults, in contrast to a piggyback loan where the lender takes in all the losses.


Does your monthly loan payment include a fee PMI? Call Capraro Appraisal Company, Inc. today at (401) 353-5500 or send us an e-mail. A recent appraisal could save you thousands.

How buyers can avoid bearing the cost of PMI

As a result of The Homeowners Protection Act of 1998, lenders are obligated to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount on nearly all loans. The law guarantees that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent. So, smart homeowners can get off the hook sooner than expected.

Considering it can take a significant number of years to reach the point where the principal is only 80% of the initial amount borrowed, it's essential to know how your Rhode Island home has increased in value. After all, any appreciation you've gained over time counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Even when nationwide trends forecast decreasing home values, be aware that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home might have acquired equity before things simmered down.

The difficult thing for almost all consumers to determine is whether their home equity has exceeded the 20% point. A certified, Rhode Island licensed real estate appraiser can definitely 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 determining 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 trouble. At which time, the homeowner can retain the savings from that point on.


The amount you keep from cancelling your PMI will make up for the cost of the appraisal in no time. Capraro Appraisal Company, Inc. are experts when it comes to real estate value trends in North Providence and Providence County. Contact us today.

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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