Let Pocono Mountain Appraisal, Inc. help you figure out if you can get rid of your PMIA 20% down payment is usually accepted when getting a mortgage. Because the risk for the lender is generally only the remainder between the home value and the amount due on the loan, the 20% provides a nice buffer against the costs of foreclosure, selling the home again, and regular value fluctuations in the event a borrower defaults.
The market was accepting down payments dropping to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender endure the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower defaults on the loan and the value of the house is less than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and oftentimes isn't even tax deductible, PMI can be expensive to a borrower. It's money-making for the lender because they obtain the money, and they get paid if the borrower is unable to pay, unlike a piggyback loan where the lender takes in all the costs.
How can a homebuyer refrain from paying PMI?With the implementation of The Homeowners Protection Act of 1998, lenders are obligated to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount on nearly all loans. The law stipulates that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent. So, keen home owners can get off the hook sooner than expected.
Because it can take several years to arrive at the point where the principal is only 80% of the initial amount borrowed, it's crucial to know how your Pennsylvania home has grown in value. After all, any appreciation you've gained over time counts towards dismissing PMI. So why pay it after your loan balance has fallen below the 80% mark? Your neighborhood might not follow national trends and/or your home may have gained equity before things declined. So even when nationwide trends indicate a reduction in home values, you should understand that real estate is local.
An accredited, Pennsylvania licensed real estate appraiser can help homeowners figure out if their equity has reached 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 Pocono Mountain Appraisal, Inc., we know when property values have risen or declined. We're experts at determining value trends in Bushkill, Pike County, and surrounding areas. When faced with figures from an appraiser, the mortgage company will often eliminate the PMI with little effort. 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: