Let Valutron Appraisal Services, Inc. help you decide if you can eliminate your PMIIt's typically understood that a 20% down payment is accepted when buying a house. The lender's liability is generally only the difference between the home value and the amount remaining on the loan, so the 20% provides a nice buffer against the costs of foreclosure, reselling the home, and regular value variations in the event a borrower is unable to pay.
The market was taking down payments discounted to 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender handle the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This supplementary policy takes care of the lender if a borrower doesn't pay on the loan and the market price of the property is less than what the borrower still owes on the loan.
PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and on many occasions isn't even tax deductible. Unlike a piggyback loan where the lender absorbs all the deficits, PMI is beneficial for the lender because they acquire the money, and they are covered if the borrower doesn't pay.
How home buyers can avoid bearing the cost of PMIThe Homeowners Protection Act of 1998 forces the lenders on the majority of loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law designates that, upon request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent. So, acute homeowners can get off the hook a little early.
Because it can take several years to arrive at the point where the principal is only 80% of the original amount of the loan, it's essential to know how your New York home has appreciated in value. After all, any appreciation you've gained over the years counts towards abolishing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Even when nationwide trends signify decreasing home values, understand that real estate is local. Your neighborhood may not be adopting the national trends and/or your home could have acquired equity before things simmered down.
The difficult thing for many homeowners to figure out is whether their home equity has exceeded the 20% point. A certified, New York licensed real estate appraiser can definitely help. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Valutron Appraisal Services, Inc., we're masters at recognizing value trends in Roslyn Heights, Nassau County, and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will most often cancel the PMI with little anxiety. At that time, the home owner can retain the savings from that point on.
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