Let Tight & Right Real Estate Valuation help you learn if you can cancel your PMI
When buying a house, a 20% down payment is typically the standard. The lender's risk is generally only the remainder 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 regular value fluctuations on the chance that a purchaser doesn't pay.
During the recent mortgage upturn of the last decade, it was customary to see lenders requiring down payments of 10, 5 or often 0 percent. A lender is able to endure the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower doesn't pay on the loan and the worth of the house is lower than the loan balance.
PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and generally isn't even tax deductible. It's beneficial for the lender because they acquire the money, and they receive payment if the borrower doesn't pay, opposite from a piggyback loan where the lender absorbs all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homebuyers can prevent bearing the cost of PMI
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Wise home owners can get off the hook a little early. The law designates that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent.
It can take countless years to get to the point where the principal is just 20% of the initial loan amount, so it's essential to know how your home has increased in value. After all, all of the appreciation you've achieved over the years counts towards abolishing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Even when nationwide trends predict declining home values, realize that real estate is local. Your neighborhood might not be minding the national trends and/or your home may have gained equity before things cooled off.
An accredited, licensed real estate appraiser in New Jersey can help home owners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At Tight & Right Real Estate Valuation, we know when property values have risen or declined. We're experts at determining value trends in Princeton, Mercer County and surrounding areas. When faced with data from an appraiser, the mortgage company will often eliminate the PMI with little anxiety. At that time, the home owner can delight in the savings from that point on.
Want to learn more about PMI removal and the Homeowners Protection Act? Click this link: