Let Roadrunner Appraisals, Inc. help you figure out if you can eliminate your PMIIt's typically understood that a 20% down payment is common when purchasing a home. Considering the risk for the lender is oftentimes only the remainder between the home value and the sum outstanding on the loan, the 20% adds a nice buffer against the costs of foreclosure, selling the home again, and regular value variations on the chance that a purchaser doesn't pay.
During the recent mortgage boom of the last decade, it was widespread to see lenders only asking for down payments of 10, 5 or often 0 percent. How does a lender manage the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower defaults on the loan and the market price of the property is less than what the borrower still owes on the loan.
PMI is pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and frequently isn't even tax deductible. Unlike a piggyback loan where the lender absorbs all the costs, PMI is money-making for the lender because they acquire the money, and they get the money if the borrower is unable to pay.
How can a buyer keep from paying PMI?As a result of The Homeowners Protection Act of 1998, lenders are forced to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount on most loans. The law pledges that, at the request of the homeowner, the PMI must be released when the principal amount equals just 80 percent. So, savvy home owners can get off the hook sooner than expected.
Considering it can take a significant number of years to arrive at the point where the principal is only 80% of the initial amount of the loan, it's crucial to know how your New York home has appreciated in value. After all, any appreciation you've acquired over the years counts towards abolishing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood might not follow national trends and/or your home could have secured equity before things declined. So even when nationwide trends signify falling home values, you should realize that real estate is local.
The difficult thing for most people to figure out is whether their home equity has exceeded the 20% point. A certified, New York licensed real estate appraiser can surely help. As appraisers, it's our job to recognize the market dynamics of our area. At Roadrunner Appraisals, Inc., we're experts at recognizing value trends in New York, New York County, and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will often cancel the PMI with little effort. At which time, the homeowner can enjoy the savings from that point on.
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