Have equity in your home? Want a lower payment? An appraisal from Twin City Appraisal Service can help you get rid of your PMI.When purchasing a home, a 20% down payment is typically the standard. The lender's risk is oftentimes only the difference between the home value and the amount remaining on the loan, so the 20% supplies a nice cushion against the costs of foreclosure, reselling the home, and regular value fluctuations on the chance that a borrower defaults.Lenders were accepting down payments as low as 10, 5 and frequently 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the added risk of the small down payment with Private Mortgage Insurance or PMI. This additional policy protects the lender in case a borrower doesn't pay on the loan and the value of the property is less than the loan balance. PMI can be costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and many times isn't even tax deductible. Separate from a piggyback loan where the lender absorbs all the losses, PMI is favorable for the lender because they collect the money, and they get paid if the borrower is unable to pay.
How can a home buyer avoid bearing the cost of PMI?The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law designates that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent. So, acute homeowners can get off the hook ahead of time.It can take a significant number of years to reach the point where the principal is only 80% of the original amount of the loan, so it's important to know how your Indiana home has increased in value. After all, every bit of appreciation you've accomplished over time counts towards removing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Your neighborhood might not adhere to national trends and/or your home might have acquired equity before things simmered down. So even when nationwide trends hint at declining home values, you should realize that real estate is local. The toughest thing for most people to determine is just when their home's equity rises above the 20% point. An accredited, Indiana licensed real estate appraiser can certainly help. It's an appraiser's job to keep up with the market dynamics of their area. At Twin City Appraisal Service, we know when property values have risen or declined. We're experts at analyzing value trends in Lafayette, Tippecanoe County, and surrounding areas. When faced with figures from an appraiser, the mortgage company will most often eliminate the PMI with little effort. At which time, the home owner 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
|
||||||||||||||||||
