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Let Appraisal Works LLC help you determine if you can eliminate your PMI
When buying a house, a 20% down payment is usually the standard.
Considering the liability for the lender is usually only the remainder between the home value and the sum remaining on the loan, the 20% provides a nice cushion against the expenses of foreclosure, selling the home again, and natural value variations on the chance that a purchaser is unable to pay.
During the recent mortgage upturn of the mid 2000s, it became widespread to see lenders reducing down payments to 10, 5 or even 0 percent.
How does a lender manage the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI.
This added policy takes care of the lender in the event a borrower is unable to pay on the loan and the value of the house 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 payment and frequently isn't even tax deductible, PMI can be costly to a borrower.
It's lucrative for the lender because they secure the money, and they receive payment if the borrower defaults, as opposed to a piggyback loan where the lender consumes all the deficits.
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Is PMI a lineitem in your monthly house payment? Call Appraisal Works LLC today at 505.983.9532 or send us an e-mail. Documentation of your home's current value could save you thousands.
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How homeowners can avoid paying PMI
The Homeowners Protection Act of 1998 forces the lenders on the majority of loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the original loan amount.
Keen home owners can get off the hook beforehand. The law designates that, at the request of the homeowner, the PMI must be released when the principal amount equals just 80 percent.
Considering it can take many years to get to the point where the principal is only 80% of the initial amount borrowed, it's crucial to know how your New Mexico home has grown in value.
After all, all of the appreciation you've acquired over the years counts towards abolishing PMI. So why pay it after your loan balance has dropped below the 80% threshold?
Even when nationwide trends indicate decreasing home values, realize that real estate is local. Your neighborhood may not be adopting the national trends and/or your home may have secured equity before things simmered down.
An accredited, New Mexico licensed real estate appraiser can help homeowners figure out just when their home's equity rises above the 20% point, as it's a difficult thing to know.
Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job!
At Appraisal Works LLC, we're masters at identifying value trends in Santa Fe, Santa Fe 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 eliminate the PMI with little trouble. At that time, the homeowner can retain the savings from that point on.
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Is PMI a part of your monthly house payment? Call Appraisal Works LLC today at 505.983.9532 or send us an e-mail. Documentation of your home's current value could save you thousands.
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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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