Let Theresa Misyak, SCRREA help you decide if you can get rid of your PMIWhen purchasing a home, a 20% down payment is typically the standard. Because the risk for the lender is generally only the remainder between the home value and the sum outstanding on the loan, the 20% supplies a nice cushion against the expenses of foreclosure, reselling the home, and typical value changeson the chance that a purchaser doesn't pay. The market was working with down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender manage the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower doesn't pay on the loan and the value of the house is lower than the loan balance. 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 monthly payment and oftentimes isn't even tax deductible. It's profitable for the lender because they obtain the money, and they get paid if the borrower is unable to pay, opposite from a piggyback loan where the lender absorbs all the costs. 
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI. How can a home owner avoid bearing the expense of PMI?The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law guarantees that, upon request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent. So, smart home owners can get off the hook a little early. It can take many years to get to the point where the principal is only 20% of the original amount of the loan, so it's important to know how your home has appreciated in value. After all, any appreciation you've acquired over the years counts towards removing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Your neighborhood may not be following the national trends and/or your home might have secured equity before things simmered down, so even when nationwide trends hint at plummeting home values, you should understand that real estate is local. An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. It's an appraiser's job to understand the market dynamics of their area. At Theresa Misyak, SCRREA, we're experts at analyzing value trends in Kearny, Hudson 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 generally remove the PMI with little anxiety. At that 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: |