Have equity in your home? Want a lower payment? An appraisal from Coyle Appraisal Companies can help you get rid of your PMI.It's typically understood that a 20% down payment is accepted when purchasing a home. The lender's only risk is often just the remainder between the home value and the amount remaining on the loan, so the 20% provides a nice cushion against the expenses of foreclosure, reselling the home, and natural value fluctuations on the chance that a borrower is unable to pay.During the recent mortgage boom that our country recently experienced, it became customary to see lenders only asking for down payments of 10, 5, 3 or even 0 percent. How does a lender handle the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This supplemental policy guards the lender in case a borrower is unable to pay on the loan and the value of the property is less than what the borrower still owes on the loan. Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI can be pricey to a borrower. Separate from a piggyback loan where the lender absorbs all the losses, PMI is beneficial for the lender because they secure the money, and they receive payment if the borrower is unable to pay.
How can home owners avoid paying PMI?With the implementation of The Homeowners Protection Act of 1998, lenders are obligated to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount on nearly all loans. Wise home owners can get off the hook a little early. The law pledges that, at the request of the home owner, the PMI must be dropped when the principal amount reaches only 80 percent.It can take a significant number of years to reach the point where the principal is just 80% of the original loan amount, so it's important to know how your Rhode Island home has increased in value. After all, any appreciation you've accomplished over time counts towards abolishing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends hint at lower overall home values, understand that real estate is local. Your neighborhood may not be following the national trends and/or your home might have acquired equity before things simmered down. An accredited, Rhode Island licensed real estate appraiser can help home owners figure out just when their home's equity rises above the 20% point, as it's a difficult thing to know. It is an appraiser's job to understand the market dynamics of their area. At Coyle Appraisal Companies, we're experts at recognizing value trends in Pawtucket, Providence 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 often do away with the PMI with little trouble. At that time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year
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Paying PMI?
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