Let Bob Warncke Appraisal Group help you figure out if you can eliminate your PMI
A 20% down payment is usually accepted when purchasing a home. Since the risk for the lender is generally only the remainder between the home value and the sum due on the loan, the 20% supplies a nice buffer against the costs of foreclosure, reselling the home, and typical value variationsin the event a borrower doesn't pay.
The market was accepting down payments as low as 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. A lender is able to endure the added risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplemental plan protects the lender in the event a borrower is unable to pay on the loan and the market price of the house is lower than the loan balance.
PMI can be pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and oftentimes isn't even tax deductible. Opposite from a piggyback loan where the lender consumes all the deficits, PMI is lucrative for the lender because they secure 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 a home owner prevent paying PMI?
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Acute home owners can get off the hook beforehand. The law pledges that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent.
Since it can take many years to arrive at the point where the principal is only 20% of the initial amount of the loan, it's essential to know how your home has increased in value. After all, any appreciation you've gained over the years counts towards abolishing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Your neighborhood may not be adopting the national trends and/or your home might have secured equity before things calmed down, so even when nationwide trends signify 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 goes over the 20% point, as it's a difficult thing to know. It's an appraiser's job to know the market dynamics of their area. At Bob Warncke Appraisal Group, we know when property values have risen or declined. We're masters at recognizing value trends in Shrewsbury, Monmouth County and surrounding areas. Faced with data from an appraiser, the mortgage company will generally cancel the PMI with little anxiety. At that time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: