TNC Appraisal Service, Inc. can help you remove your Private Mortgage Insurance

It's largely inferred that a 20% down payment is the standard when getting a mortgage. The lender's liability is usually only the remainder between the home value and the sum due on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and regular value variations in the event a borrower is unable to pay.

During the recent mortgage boom of the mid 2000s, it became common to see lenders commanding down payments of 10, 5 or even 0 percent. How does a lender manage the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower defaults on the loan and the worth of the property is lower than the balance of the loan.

PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible. It's beneficial for the lender because they acquire the money, and they get paid if the borrower defaults, separate from a piggyback loan where the lender consumes all the losses.


How homeowners can avoid bearing the cost of PMI

With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law stipulates that, at the request of the home owner, the PMI must be released when the principal amount reaches just 80 percent. So, keen home owners can get off the hook ahead of time.

Considering it can take countless years to reach the point where the principal is only 20% of the original amount borrowed, it's important to know how your home has grown in value. After all, any appreciation you've accomplished over time counts towards removing PMI. So why pay it after your loan balance has dropped below the 80% mark? Even when nationwide trends signify plunging home values, realize that real estate is local. Your neighborhood may not be adopting the national trends and/or your home may have acquired equity before things calmed down.

A certified, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a tough thing to know. It is an appraiser's job to recognize the market dynamics of their area. At TNC Appraisal Service, Inc., we're experts at identifying value trends in Manahawkin, Ocean County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will often eliminate the PMI with little effort. At that time, the homeowner can delight in the savings from that point on.
