Have equity in your home? Want a lower payment? An appraisal from Cardinal Real Estate can help you get rid of your PMI.When buying a house, a 20% down payment is usually the standard. Considering the liability for the lender is oftentimes only the remainder between the home value and the amount remaining on the loan, the 20% provides a nice buffer against the costs of foreclosure, selling the home again, and natural value fluctuations on the chance that a purchaser is unable to pay.
Banks were accepting down payments discounted to 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender endure the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This supplementary plan covers the lender if a borrower doesn't pay on the loan and the value of the home is lower than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and many times isn't even tax deductible, PMI can be pricey to a borrower. Instead of a piggyback loan where the lender absorbs all the damages, PMI is profitable for the lender because they secure the money, and they receive payment if the borrower is unable to pay.
How homebuyers can refrain from bearing the expense of PMIWith the passage of The Homeowners Protection Act of 1998, lenders are forced to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount on nearly all loans. The law promises that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, keen home owners can get off the hook a little earlier.
It can take many years to get to the point where the principal is only 80% of the original amount of the loan, so it's important to know how your New Jersey home has grown in value. After all, any appreciation you've obtained over time counts towards removing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends predict declining home values, realize that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home may have gained equity before things declined.
The toughest thing for most home owners to know is just when their home's equity goes over if their home equity has exceeded the 20% point. An accredited, New Jersey licensed real estate appraiser can surely help. As appraisers, it's our job to understand the market dynamics of our area. At Cardinal Real Estate, we're experts at identifying value trends in Woodbury, Gloucester County, and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will most often cancel the PMI with little anxiety. At which time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: