Sirius Appraisal Services can help you remove your Private Mortgage InsuranceIt's widely known that a 20% down payment is the standard when buying a house. The lender's liability is often only the difference between the home value and the amount remaining on the loan, so the 20% adds a nice buffer against the costs of foreclosure, selling the home again, and regular value changes in the event a borrower defaults.
The market was taking down payments dropping to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to endure the added risk of the low down payment with Private Mortgage Insurance or PMI. PMI protects the lender in the event a borrower is unable to pay on the loan and the market price of the home is lower than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and frequently isn't even tax deductible, PMI is pricey to a borrower. Unlike a piggyback loan where the lender takes in all the costs, PMI is money-making for the lender because they collect the money, and they are covered if the borrower doesn't pay.
How home owners can prevent bearing the expense of PMIThe Homeowners Protection Act of 1998 makes the lenders on the majority of loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law promises that, upon request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent. So, wise homeowners can get off the hook a little earlier.
Since it can take several years to get to the point where the principal is just 80% of the original amount borrowed, it's essential to know how your New York home has appreciated in value. After all, any appreciation you've achieved over the years counts towards abolishing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold? Even when nationwide trends forecast decreasing home values, be aware that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home might have acquired equity before things declined.
An accredited, New York licensed real estate appraiser can help homeowners figure out if their equity has reached 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. At Sirius Appraisal Services, we're masters at recognizing value trends in Jamaica Estates, Queens 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 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:
Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year
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