Have equity in your home? Want a lower payment? An appraisal from Hardy Appraisal Service can help you get rid of your PMI.A 20% down payment is usually accepted when getting a mortgage. Because the risk for the lender is generally only the difference between the home value and the amount due on the loan, the 20% adds a nice cushion against the charges of foreclosure, selling the home again, and natural value variations in the event a borrower doesn't pay.The market was working with down payments as low as 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. A lender is able to manage the increased risk of the small down payment with Private Mortgage Insurance or PMI. This additional plan guards the lender in case a borrower defaults on the loan and the value of the property is lower than what is owed on the loan. PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and oftentimes isn't even tax deductible. It's beneficial for the lender because they acquire the money, and they receive payment if the borrower defaults, as opposed to a piggyback loan where the lender consumes all the damages.
How homebuyers can avoid bearing the expense of PMIAs a result of The Homeowners Protection Act of 1998, lenders are required to automatically stop the PMI when the principal balance of the loan equals 78 percent of the original loan amount on most loans. Smart homeowners can get off the hook beforehand. The law promises that, upon request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent.It can take several years to arrive at the point where the principal is just 80% of the original amount borrowed, so it's crucial to know how your Alabama home has increased in value. After all, every bit of appreciation you've acquired over the years counts towards dismissing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood may not follow national trends and/or your home could have secured equity before the economy cooled off. So even when nationwide trends forecast declining home values, you should realize that real estate is local. The hardest thing for many people to figure out is just when their home's equity rises above the 20% point. An accredited, Alabama licensed real estate appraiser can surely help. It's an appraiser's job to understand the market dynamics of their area. At Hardy Appraisal Service, we're masters at identifying value trends in Auburn, Lee 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 retain 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
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