Let Petrucci Real Estate Services help you determine if you can eliminate your PMIWhen buying a house, a 20% down payment is typically the standard. Considering the risk for the lender is often only the difference between the home value and the amount remaining on the loan, the 20% adds a nice buffer against the charges of foreclosure, selling the home again, and natural value changes on the chance that a purchaser defaults.Lenders were accepting down payments discounted to 10, 5 and frequently 0 percent during the mortgage boom of the last decade. How does a lender handle the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This supplemental policy guards the lender in the event a borrower defaults on the loan and the market price of the property is less than the balance of the loan. PMI is pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and frequently isn't even tax deductible. It's favorable for the lender because they acquire the money, and they are covered if the borrower is unable to pay, different from a piggyback loan where the lender takes in all the deficits.
How can a homeowner keep from paying PMI?With the implementation of The Homeowners Protection Act of 1998, lenders are forced to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount on most loans. Savvy home owners can get off the hook a little earlier. The law states that, at the request of the homeowner, the PMI must be released when the principal amount equals just 80 percent.Since it can take many years to arrive at the point where the principal is just 80% of the original loan amount, it's important to know how your Connecticut home has increased in value. After all, every bit of appreciation you've gained over time counts towards abolishing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Your neighborhood might not follow national trends and/or your home may have acquired equity before the economy declined. So even when nationwide trends predict decreasing home values, you should understand that real estate is local. The difficult thing for almost all consumers to figure out is just when their home's equity rises above the 20% point. A certified, Connecticut licensed real estate appraiser can certainly help. It's an appraiser's job to understand the market dynamics of their area. At Petrucci Real Estate Services, we're experts at determining value trends in Norwalk, Fairfield 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 do away with the PMI with little anxiety. At which time, the homeowner can delight in 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
|
||||||||||||||||||
