Marco Tiberio can help you remove your Private Mortgage InsuranceA 20% down payment is usually the standard when buying a house. Considering the liability for the lender is often only the difference between the home value and the amount remaining on the loan, the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and natural value fluctuations on the chance that a purchaser doesn't pay.The market was accepting down payments as low as 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. How does a lender handle the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI protects the lender if a borrower defaults on the loan and the market price of the home is lower than what is owed 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 monthly payment and often isn't even tax deductible. Separate from a piggyback loan where the lender takes in all the damages, PMI is favorable for the lender because they obtain the money, and they get paid if the borrower is unable to pay.
How can buyers prevent paying PMI?With the implementation of The Homeowners Protection Act of 1998, lenders are forced to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount on nearly all loans. The law pledges that, upon request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent. So, wise homeowners can get off the hook a little earlier.It can take several years to get to the point where the principal is only 80% of the original loan amount, so it's essential to know how your New York home has increased in value. After all, every bit of appreciation you've accomplished over time counts towards dismissing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood may not adhere to national trends and/or your home may have acquired equity before things cooled off. So even when nationwide trends forecast declining home values, you should know most importantly that real estate is local. An accredited, New York licensed real estate appraiser can help home owners figure out if their equity has reached 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 Marco Tiberio, we're experts at pinpointing value trends in Rochester, Monroe County, and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will most often do away with the PMI with little effort. At which time, the home owner can retain 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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