Let CJ Vigil & Associates, Inc. help you learn if you can eliminate your PMIWhen getting a mortgage, a 20% down payment is typically the standard. The lender's only risk is often just the remainder between the home value and the sum remaining on the loan, so the 20% provides a nice cushion against the costs of foreclosure, reselling the home, and natural value changes in the event a purchaser doesn't pay.Lenders were accepting down payments discounted to 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. How does a lender endure the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This supplementary policy guards the lender in the event a borrower is unable to pay on the loan and the market price of the property is lower than what is owed on the loan. PMI can be expensive to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and oftentimes isn't even tax deductible. As opposed to a piggyback loan where the lender takes in all the damages, PMI is advantageous for the lender because they acquire the money, and they receive payment if the borrower defaults.
How can a homeowner keep from paying PMI?With the implementation of The Homeowners Protection Act of 1998, lenders are obligated to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount on nearly all loans. Smart home owners can get off the hook sooner than expected. The law guarantees that, upon request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent.It can take many years to get to the point where the principal is only 80% of the initial loan amount, so it's necessary to know how your New Mexico home has appreciated in value. After all, every bit of appreciation you've gained over time counts towards removing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Even when nationwide trends indicate lower overall home values, understand that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home might have secured equity before things cooled off. An accredited, New Mexico licensed real estate appraiser can help home owners figure out if their equity has made it to 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 CJ Vigil & Associates, Inc., we're experts at determining value trends in Santa Fe, Santa Fe County, and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will usually do away with the PMI with little effort. At which 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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