Have equity in your home? Want a lower payment? An appraisal from Appraisal Solutions can help you get rid of your PMI.When getting a mortgage, a 20% down payment is usually the standard. Since the liability for the lender is often only the remainder between the home value and the amount due on the loan, the 20% supplies a nice buffer against the charges of foreclosure, reselling the home, and natural value fluctuations in the event a purchaser defaults.During the recent mortgage boom of the last decade, it was common to see lenders making deals with down payments of 10, 5 or even 0 percent. A lender is able to manage the added risk of the low down payment with Private Mortgage Insurance or PMI. This additional plan protects the lender if a borrower is unable to pay on the loan and the market price of the house is less than what the borrower still owes on the loan. PMI can be costly to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and often isn't even tax deductible. Instead of a piggyback loan where the lender takes in all the losses, PMI is beneficial for the lender because they collect the money, and they receive payment if the borrower defaults.
How can buyers avoid paying PMI?The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law stipulates that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent. So, wise homeowners can get off the hook a little early.It can take many years to reach the point where the principal is just 80% of the original amount of the loan, so it's important to know how your Alabama home has appreciated in value. After all, all of the appreciation you've obtained over the years counts towards dismissing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Even when nationwide trends predict declining home values, be aware that real estate is local. Your neighborhood may not be following the national trends and/or your home may have gained equity before things cooled off. An accredited, Alabama licensed real estate appraiser can help homeowners figure out just when their home's equity rises above the 20% point, as it's a difficult thing to know. It is an appraiser's job to keep up with the market dynamics of their area. At Appraisal Solutions, we're masters at analyzing value trends in Gadsden, Etowah County, and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will usually cancel the PMI with little anxiety. 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
|
||||||||||||||||||
