Have equity in your home? Want a lower payment? An appraisal from REal VALUE can help you get rid of your PMI.It's largely known that a 20% down payment is common when getting a mortgage. The lender's liability is generally only the remainder between the home value and the amount remaining on the loan, so the 20% supplies a nice buffer against the costs of foreclosure, selling the home again, and natural value changes on the chance that a borrower doesn't pay.During the recent mortgage upturn that our country recently experienced, it was widespread to see lenders making deals with down payments of 10, 5, 3 or often 0 percent. How does a lender handle the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This supplemental policy guards the lender if a borrower doesn't pay on the loan and the market price of the property is less than the loan balance. Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and oftentimes isn't even tax deductible, PMI can be pricey to a borrower. Different from a piggyback loan where the lender absorbs all the costs, PMI is money-making for the lender because they collect the money, and they are covered if the borrower defaults.
How can home owners prevent bearing the expense 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 reaches 78 percent of the primary loan amount on nearly all loans. The law designates that, upon request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent. So, smart homeowners can get off the hook sooner than expected.It can take a significant number of years to reach the point where the principal is just 80% of the original loan amount, so it's important to know how your New Hampshire home has grown in value. After all, any appreciation you've accomplished over time counts towards dismissing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends hint at falling home values, understand that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home might have acquired equity before things cooled off. An accredited, New Hampshire licensed real estate appraiser can help home owners figure out if their equity has reached the 20% point, as it's a difficult thing to know. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At REal VALUE, we're experts at recognizing value trends in Londonderry, Rockingham County, and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will generally remove the PMI with little anxiety. At which time, the home owner can enjoy the savings from that point on.
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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