Duncan Appraisals can help you remove your Private Mortgage Insurance

It's generally understood that a 20% down payment is common when buying a house. The lender's liability is generally only the difference between the home value and the sum remaining on the loan, so the 20% supplies a nice cushion against the expenses of foreclosure, selling the home again, and regular value variations on the chance that a borrower doesn't pay.

During the recent mortgage boom of the mid 2000s, it was customary to see lenders taking down payments of 10, 5 or sometimes 0 percent. How does a lender endure the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This additional plan covers the lender in case a borrower doesn't pay on the loan and the market price of the property is less than what the borrower still owes on the loan.

PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and generally isn't even tax deductible. It's beneficial for the lender because they collect the money, and they receive payment if the borrower defaults, opposite from a piggyback loan where the lender absorbs all the damages.

Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.

How can a homeowner keep from bearing the expense of PMI?

With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law guarantees that, upon request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent. So, acute homeowners can get off the hook ahead of time.

It can take many years to reach the point where the principal is just 20% of the initial amount of the loan, so it's important to know how your home has appreciated in value. After all, all of the appreciation you've gained over time counts towards dismissing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Despite the fact that nationwide trends signify falling home values, be aware that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home could have secured equity before things simmered down.

The toughest thing for almost all homeowners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can certainly help. It is an appraiser's job to keep up with the market dynamics of their area. At Duncan Appraisals, we know when property values have risen or declined. We're masters at analyzing value trends in Wood Ridge, Bergen County and surrounding areas. Faced with figures from an appraiser, the mortgage company will usually eliminate the PMI with little trouble. At that time, the homeowner can delight in 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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