Have equity in your home? Want a lower payment? An appraisal from O'Malley Real Estate Appraisal Company can help you get rid of your PMI.It's widely understood that a 20% down payment is common when getting a mortgage. The lender's only liability is usually just the difference between the home value and the balance outstanding on the loan, so the 20% adds a nice buffer against the charges of foreclosure, selling the home again, and regular value fluctuations in the event a borrower is unable to pay.During the recent mortgage boom that our country recently experienced, it was widespread to see lenders reducing down payments to 10, 5 or even 0 percent. How does a lender handle the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower is unable to pay on the loan and the value of the home is lower than the balance of the loan. Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and many times isn't even tax deductible, PMI can be pricey to a borrower. Unlike a piggyback loan where the lender consumes all the costs, PMI is profitable for the lender because they secure the money, and they get paid if the borrower is unable to pay.
How can a home buyer keep from bearing the cost of PMI?The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law states that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, keen home owners can get off the hook ahead of time.It can take a significant number of years to arrive at the point where the principal is only 80% of the original amount borrowed, so it's necessary to know how your Pennsylvania home has appreciated in value. After all, any appreciation you've obtained over the years counts towards removing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends predict decreasing home values, realize that real estate is local. Your neighborhood may not be heeding the national trends and/or your home may have secured equity before things declined. An accredited, Pennsylvania licensed real estate appraiser can help homeowners figure out just when their home's equity rises above the 20% point, as it's a hard thing to know. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At O'Malley Real Estate Appraisal Company, we're experts at recognizing value trends in Ambridge, Beaver County, and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will generally remove the PMI with little anxiety. At that time, the home owner 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
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