RJS Appraisals can help you remove your Private Mortgage InsuranceA 20% down payment is typically accepted when buying a house. The lender's liability is usually only the difference between the home value and the amount outstanding on the loan, so the 20% adds a nice cushion against the expenses of foreclosure, reselling the home, and natural value changes on the chance that a borrower doesn't pay.
During the recent mortgage boom of the last decade, it was widespread to see lenders reducing down payments to 10, 5, 3 or sometimes 0 percent. A lender is able to handle the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. This additional plan covers the lender in case a borrower is unable to pay on the loan and the market price of the house is less than the balance of the loan.
PMI can be costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and often isn't even tax deductible. It's profitable for the lender because they obtain the money, and they get paid if the borrower defaults, as opposed to a piggyback loan where the lender consumes all the costs.
How can home owners prevent bearing the cost of PMI?The Homeowners Protection Act of 1998 forces the lenders on the majority of loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Savvy home owners can get off the hook sooner than expected. The law stipulates that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent.
Because it can take several years to reach the point where the principal is only 80% of the initial amount of the loan, it's important to know how your New York home has appreciated in value. After all, any appreciation you've accomplished over the years counts towards removing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Your neighborhood might not adhere to national trends and/or your home could have secured equity before the economy simmered down. So even when nationwide trends predict declining home values, you should understand that real estate is local.
An accredited, New York licensed real estate appraiser can help home owners figure out just when their home's equity goes over the 20% point, as it's a tough thing to know. As appraisers, it's our job to know the market dynamics of our area. At RJS Appraisals, we're experts at pinpointing value trends in Staten Island, Richmond County, and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will often remove the PMI with little effort. At that time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: