Let AC Appraisal International, Ltd. help you decide if you can cancel your PMIA 20% down payment is usually the standard when purchasing a home. The lender's risk is often only the difference between the home value and the sum remaining on the loan, so the 20% provides a nice buffer against the expenses of foreclosure, reselling the home, and regular value variations in the event a borrower doesn't pay.
The market was accepting down payments dropping to 10, 5 and even 0 percent during the mortgage boom of the last decade. How does a lender manage the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This added plan takes care of the lender in case a borrower defaults on the loan and the market price of the property is less than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and often isn't even tax deductible, PMI can be costly to a borrower. Unlike a piggyback loan where the lender consumes all the losses, PMI is favorable for the lender because they obtain the money, and they get paid if the borrower is unable to pay.
How buyers can prevent paying PMIThe Homeowners Protection Act of 1998 obligates the lenders on the majority of loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Savvy home owners can get off the hook a little earlier. The law designates that, upon request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent.
It can take many years to reach the point where the principal is just 80% of the initial amount borrowed, so it's crucial to know how your New York home has grown in value. After all, any appreciation you've gained over time counts towards abolishing PMI. So why pay it after your loan balance has dropped below the 80% mark? Your neighborhood may not conform to national trends and/or your home might have secured equity before the economy declined. So even when nationwide trends forecast falling home values, you should understand that real estate is local.
The toughest thing for almost all consumers to determine is just when their home's equity goes over the 20% point. An accredited, New York licensed real estate appraiser can surely help. It is an appraiser's job to keep up with the market dynamics of their area. At AC Appraisal International, Ltd., we know when property values have risen or declined. We're experts at determining value trends in North Babylon, Suffolk County, and surrounding areas. Faced with data from an appraiser, the mortgage company will usually cancel the PMI with little anxiety. At which time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link:
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