Have equity in your home? Want a lower payment? An appraisal from Jeff Pennini Appraisals can help you get rid of your PMI.A 20% down payment is usually the standard when getting a mortgage. The lender's liability is often only the difference between the home value and the balance outstanding 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.Lenders were accepting down payments dropping to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender manage the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This supplemental policy guards the lender if a borrower is unable to pay on the loan and the market price of the house is less than the loan balance. PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and on many occasions isn't even tax deductible. It's beneficial for the lender because they secure the money, and they are covered if the borrower doesn't pay, separate from a piggyback loan where the lender consumes all the losses.
How can home owners keep from paying PMI?As a result of The Homeowners Protection Act of 1998, lenders are forced to automatically stop the PMI when the principal balance of the loan equals 78 percent of the primary loan amount on nearly all loans. Savvy home owners can get off the hook ahead of time. The law states that, at the request of the home owner, the PMI must be released when the principal amount equals just 80 percent.Since it can take many years to reach the point where the principal is just 80% of the initial loan amount, it's crucial to know how your Massachusetts home has grown in value. After all, every bit of appreciation you've gained over time counts towards abolishing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends forecast decreasing home values, understand that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home may have acquired equity before things cooled off. The hardest thing for almost all people to determine is whether their home equity has exceeded the 20% point. A certified, Massachusetts licensed real estate appraiser can definitely help. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Jeff Pennini Appraisals, we're masters at identifying value trends in Hanson, Plymouth County, and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will most often do away with the PMI with little trouble. At which 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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