Queens Appraisal Services can help you remove your Private Mortgage Insurance
It's generally understood that a 20% down payment is accepted when purchasing a home. Because the risk for the lender is usually only the difference between the home value and the amount remaining on the loan, the 20% provides a nice cushion against the expenses of foreclosure, selling the home again, and regular value variations in the event a borrower doesn't pay.
During the recent mortgage upturn of the mid 2000's, it became common to see lenders taking down payments of 10, 5 or even 0 percent. A lender is able to manage the added risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI covers the lender if a borrower is unable to pay on the loan and the value of the house is lower than what is owed on the loan.
PMI can be costly to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and often isn't even tax deductible. Opposite from a piggyback loan where the lender takes in all the losses, PMI is advantageous for the lender because they secure the money, and they receive payment 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 buyers can refrain from paying PMI
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Savvy home owners can get off the hook a little early. The law stipulates that, at the request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent.
Considering it can take countless years to reach the point where the principal is only 20% of the initial amount borrowed, it's crucial to know how your home has appreciated in value. After all, any appreciation you've acquired over time counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends hint at plunging home values, be aware that real estate is local. Your neighborhood might not be following the national trends and/or your home may have acquired equity before things settled down.
A certified, 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. As appraisers, it's our job to know the market dynamics of our area. At QUEENS APPRAISAL SERVICES, we know when property values have risen or declined. We're masters at determining value trends in Queens County, Western Nassau County and surrounding areas. Faced with information from an appraiser, the mortgage company will most often drop the PMI with little anxiety. At that time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: