REVARI (Real Estate Valuation and Research Inc.) can help you remove your Private Mortgage Insurance
It's largely understood that a 20% down payment is accepted when buying a house. Since the risk for the lender is often only the remainder between the home value and the sum remaining on the loan, the 20% adds a nice buffer against the charges of foreclosure, reselling the home, and regular value fluctuationson the chance that a borrower doesn't pay.
The market was accepting down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the added risk of the small down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower defaults on the loan and the value of the house is less than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and often isn't even tax deductible, PMI can be costly to a borrower. Contradictory to a piggyback loan where the lender consumes all the deficits, PMI is money-making for the lender because they collect the money, and they get the money if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home buyers can avoid bearing the cost of PMI
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Wise homeowners can get off the hook a little early. The law designates that, upon request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent.
It can take countless years to arrive at the point where the principal is just 20% of the initial loan amount, so it's important to know how your home has increased in value. After all, all of the appreciation you've accomplished over time counts towards removing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Your neighborhood might not be adopting the national trends and/or your home might have acquired equity before things settled down, so even when nationwide trends indicate declining 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 difficult thing to know. As appraisers, it's our job to understand the market dynamics of our area. At REVARI (Real Estate Valuation and Research Inc.), we're experts at pinpointing value trends in Claremont, Sullivan County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will usually eliminate the PMI with little trouble. At that time, the home owner can delight in the savings from that point on.
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