Let John McCarty help you decide if you can cancel your PMIWhen getting a mortgage, a 20% down payment is usually the standard. Since the liability for the lender is oftentimes only the difference between the home value and the sum due on the loan, the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and natural value variationson the chance that a purchaser is unable to pay. During the recent mortgage upturn of the last decade, it became customary to see lenders taking down payments of 10, 5 or often 0 percent. How does a lender endure the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower is unable to pay on the loan and the market price of the property is lower than the loan balance. PMI is pricey to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and many times isn't even tax deductible. It's beneficial for the lender because they secure the money, and they get paid if the borrower defaults, different from a piggyback loan where the lender consumes all the losses. 
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI. How can a home owner prevent bearing the cost of PMI?The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Acute home owners can get off the hook beforehand. The law designates that, at the request of the home owner, the PMI must be released when the principal amount reaches just 80 percent. Because it can take many years to get to the point where the principal is just 20% of the initial amount of the loan, it's crucial to know how your home has grown in value. After all, every bit of appreciation you've achieved over the years counts towards removing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% mark? Your neighborhood might not be adhering to the national trends and/or your home might have secured equity before things settled down, so even when nationwide trends indicate plummeting home values, you should understand that real estate is local. A certified, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. As appraisers, it's our job to know the market dynamics of our area. At John McCarty, we know when property values have risen or declined. We're masters at recognizing value trends in Chatham, Morris County and surrounding areas. Faced with information from an appraiser, the mortgage company will generally do away with the PMI with little effort. At that time, the home owner can delight in the savings from that point on.
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