Let Capraro Appraisal Company, Inc. help you decide if you can get rid of your PMI
It's typically inferred that a 20% down payment is common when purchasing a home. Because the liability for the lender is usually only the difference between the home value and the sum remaining on the loan, the 20% supplies a nice buffer against the charges of foreclosure, reselling the home, and typical value changeson the chance that a borrower doesn't pay.
During the recent mortgage boom of the last decade, it became customary to see lenders commanding down payments of 10, 5 or often 0 percent. A lender is able to handle the increased risk of the small down payment with Private Mortgage Insurance or PMI. This supplemental policy takes care of the lender in case a borrower doesn't pay on the loan and the worth of the house is lower than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and frequently isn't even tax deductible, PMI can be expensive to a borrower. It's profitable for the lender because they secure the money, and they get paid if the borrower doesn't pay, 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 can homebuyers prevent bearing the cost of PMI?
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Wise homeowners can get off the hook a little earlier. The law promises that, upon request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent.
It can take countless years to reach the point where the principal is only 20% of the original amount of the loan, so it's essential to know how your home has increased in value. After all, any appreciation you've achieved over the years counts towards removing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Your neighborhood may not be heeding the national trends and/or your home may have acquired equity before things cooled off, so even when nationwide trends forecast declining home values, you should understand that real estate is local.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a tough 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 masters at determining value trends in North Providence, Providence County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will generally do away with the PMI with little trouble. At which time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: