Brickhouse Appraisals, LLC, can help you remove your Private Mortgage InsuranceIt's typically inferred that a 20% down payment is common when buying a house. The lender's only liability is often just the remainder between the home value and the amount remaining on the loan, so the 20% supplies a nice cushion against the expenses of foreclosure, reselling the home, and typical value changes in the event a purchaser doesn't pay.
During the recent mortgage boom of the last decade, it became widespread to see lenders only asking for down payments of 10, 5 or often 0 percent. How does a lender handle the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower defaults on the loan and the value of the house is lower than the balance of the loan.
PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and often isn't even tax deductible. It's profitable for the lender because they collect the money, and they get the money if the borrower defaults, unlike a piggyback loan where the lender absorbs all the costs.
How can a homeowner refrain from bearing the cost of PMI?The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law promises that, at the request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent. So, acute home owners can get off the hook a little early.
Considering it can take many years to reach the point where the principal is only 80% of the initial loan amount, it's important to know how your New York home has appreciated in value. After all, any appreciation you've accomplished over the years counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Your neighborhood might not conform to national trends and/or your home could have secured equity before things declined. So even when nationwide trends indicate a reduction in home values, you should understand that real estate is local.
A certified, New York licensed real estate appraiser can help homeowners figure out if their equity has made it to the 20% point, as it's a tough thing to know. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Brickhouse Appraisals, LLC,, we're experts at pinpointing value trends in Yonkers, Westchester County, and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will generally cancel the PMI with little trouble. At that time, the homeowner can enjoy the savings from that point on.
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