Have equity in your home? Want a lower payment? An appraisal from Cayuga Appraisals, LLC can help you get rid of your PMI.A 20% down payment is usually the standard when buying a house. The lender's only risk is often just the difference between the home value and the sum remaining on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, reselling the home, and regular value variations in the event a borrower defaults.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 handle the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower doesn't pay on the loan and the value of the home is less than the loan balance. PMI can be expensive to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and oftentimes isn't even tax deductible. It's beneficial for the lender because they acquire the money, and they get the money if the borrower defaults, unlike a piggyback loan where the lender absorbs all the deficits.
How can homeowners avoid bearing the cost of PMI?The Homeowners Protection Act of 1998 forces the lenders on the majority of loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law stipulates that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, wise homeowners can get off the hook ahead of time.Since it can take a significant number of years to get to the point where the principal is only 80% of the original amount borrowed, it's essential to know how your New York home has grown in value. After all, any appreciation you've obtained over time counts towards dismissing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Your neighborhood might not follow national trends and/or your home may have gained equity before things declined. So even when nationwide trends signify falling home values, you should understand that real estate is local. The difficult thing for many people to figure out is whether their home equity has exceeded the 20% point. A certified, New York licensed real estate appraiser can certainly help. It is an appraiser's job to understand the market dynamics of their area. At Cayuga Appraisals, LLC, we know when property values have risen or declined. We're experts at determining value trends in Ithaca, Tompkins County, and surrounding areas. Faced with data from an appraiser, the mortgage company will most often cancel the PMI with little anxiety. 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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