Have equity in your home in Suffolk & Nassau Countys? Want a lower payment? An appraisal from Gregory Olivotti can help you get rid of your PMI.
A 20% down payment is typically the standard when buying a house. Considering the liability for the lender is oftentimes 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, selling the home again, and typical value variations on the chance that a borrower defaults.
Lenders were 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 increased risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower defaults on the loan and the market price of the property is less than the balance of the loan.
PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and often isn't even tax deductible. Different from a piggyback loan where the lender takes in all the deficits, PMI is beneficial for the lender because they obtain the money, and they get paid if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How buyers can prevent paying PMI
With the implementation of The Homeowners Protection Act of 1998, on most loans' lenders are required to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Savvy homeowners can get off the hook a little early. The law designates that, at the request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent.
It can take many years to arrive at the point where the principal is only 20% of the initial amount of the loan, so it's important to know how your home has appreciated in value. After all, every bit of appreciation you've acquired over the years counts towards dismissing PMI. So, what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Despite the fact that nationwide trends signify declining home values, realize that real estate is local. Your neighborhood might not be following the national trends and/or your home may have gained equity before things settled down.
A licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. As appraisers, it's our job to recognize the market dynamics of our area. Appraisers should know when property values have risen or declined. We're masters at analyzing value trends in Suffolk and Nassau County and surrounding areas. When faced with information from an appraiser, the mortgage company will usually cancel the PMI with little effort. 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: