Let Bluegate Appraisal Services help you learn if you can eliminate your PMIA 20% down payment is typically accepted when getting a mortgage. The lender's only liability is generally just the remainder between the home value and the balance due on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, selling the home again, and natural value variations in the event a borrower defaults.During the recent mortgage upturn of the mid 2000s, it became customary to see lenders only asking for down payments of 10, 5 or sometimes 0 percent. How does a lender endure the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This added policy protects the lender in the event a borrower is unable to pay on the loan and the value of the property is less than what is owed on the loan. Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and many times isn't even tax deductible, PMI can be pricey to a borrower. Unlike a piggyback loan where the lender absorbs all the losses, PMI is beneficial for the lender because they secure the money, and they receive payment if the borrower defaults.
How can homebuyers refrain from paying PMI?With the implementation of The Homeowners Protection Act of 1998, lenders are forced to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount on most loans. Smart homeowners can get off the hook a little early. The law promises that, upon request of the home owner, the PMI must be released when the principal amount equals only 80 percent.Considering it can take many years to arrive at the point where the principal is only 80% of the initial amount borrowed, it's necessary to know how your Indiana home has grown in value. After all, every bit of appreciation you've acquired over the years counts towards removing PMI. So why pay it after your loan balance has fallen 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 predict declining home values, you should understand that real estate is local. A certified, Indiana licensed real estate appraiser can help homeowners figure out if their equity has exceeed the 20% point, as it's a difficult thing to know. It is an appraiser's job to understand the market dynamics of their area. At Bluegate Appraisal Services, we're masters at identifying value trends in Granger, St Joseph County, and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will generally do away with the PMI with little anxiety. At that time, the home owner can relish 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
|
||||||||||||||||||
