Coastal Appraisal Service can help you remove your Private Mortgage InsuranceA 20% down payment is typically the standard when buying a house. Since the risk for the lender is generally only the difference between the home value and the amount remaining on the loan, the 20% supplies a nice cushion against the expenses of foreclosure, selling the home again, and natural value variations in the event a borrower defaults.
During the recent mortgage boom of the last decade, it became widespread to see lenders making deals with down payments of 10, 5 or often 0 percent. A lender is able to handle the added risk of the low down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower doesn't pay on the loan and the market price of the house is less than what the borrower still owes on the loan.
PMI can be pricey to a borrower on the grounds 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 profitable for the lender because they acquire the money, and they get paid if the borrower defaults, different from a piggyback loan where the lender takes in all the damages.
How can a home buyer avoid paying PMI?The Homeowners Protection Act of 1998 forces the lenders on the majority of loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Savvy homeowners can get off the hook a little earlier. The law stipulates that, at the request of the home owner, the PMI must be released when the principal amount equals just 80 percent.
It can take several years to arrive at the point where the principal is just 80% of the initial amount borrowed, so it's important to know how your New Jersey home has grown in value. After all, all of the appreciation you've achieved over time counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Your neighborhood may not follow national trends and/or your home might have secured equity before things declined. So even when nationwide trends indicate falling home values, you should realize that real estate is local.
A certified, New Jersey licensed real estate appraiser can help home owners figure out if their equity has exceeed the 20% point, as it's a tough thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At Coastal Appraisal Service, we're experts at analyzing value trends in Toms River, Ocean County, and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will most often remove the PMI with little anxiety. 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