Linda Bloom (203)625-9220 can help you remove your Private Mortgage InsuranceWhen getting a mortgage, a 20% down payment is typically the standard. Considering the risk for the lender is usually only the difference between the home value and the sum outstanding on the loan, the 20% adds a nice buffer against the costs of foreclosure, selling the home again, and natural value variations on the chance that a purchaser is unable to pay.
The market was working with down payments dropping to 10, 5 and often 0 percent during the mortgage boom of the last decade. A lender is able to endure the additional risk of the small down payment with Private Mortgage Insurance or PMI. This supplementary plan guards the lender in the event a borrower defaults on the loan and the value of the property is lower than what the borrower still owes on the loan.
PMI is 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 often isn't even tax deductible. It's money-making 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 absorbs all the costs.
How can home buyers avoid bearing the expense of PMI?The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Wise home owners can get off the hook sooner than expected. The law guarantees that, upon request of the home owner, the PMI must be released when the principal amount reaches only 80 percent.
It can take several years to arrive at the point where the principal is only 80% of the initial loan amount, so it's crucial to know how your Connecticut home has appreciated in value. After all, all of the appreciation you've gained over the years counts towards abolishing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Your neighborhood might not conform to national trends and/or your home may have secured equity before the economy cooled off. So even when nationwide trends hint at decreasing home values, you should know most importantly that real estate is local.
An accredited, Connecticut licensed real estate appraiser can help homeowners figure out if their equity has exceeed the 20% point, as it's a hard thing to know. It's an appraiser's job to understand the market dynamics of their area. At Linda Bloom (203)625-9220, we're experts at identifying value trends in Cos Cob, Fairfield 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 most often drop the PMI with little trouble. 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