Have equity in your home? Want a lower payment? An appraisal from ASAP Appraisal, LLC can help you get rid of your PMI.It's widely known that a 20% down payment is the standard when purchasing a home. The lender's only liability is typically just the difference between the home value and the amount outstanding on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and regular value variations in the event a borrower is unable to pay.
During the recent mortgage boom that our country recently experienced, it became widespread to see lenders making deals with down payments of 10, 5, 3 or sometimes 0 percent. How does a lender endure the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This additional plan covers the lender in the event a borrower is unable to pay on the loan and the market price of the house is lower than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and frequently isn't even tax deductible, PMI can be costly to a borrower. Separate from a piggyback loan where the lender absorbs all the damages, PMI is advantageous for the lender because they obtain the money, and they receive payment if the borrower doesn't pay.
How buyers can prevent bearing the expense of PMIThe Homeowners Protection Act of 1998 requires the lenders on most loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law stipulates that, at the request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent. So, wise homeowners can get off the hook ahead of time.
Since it can take a significant number of years to reach the point where the principal is just 80% of the original amount borrowed, it's important to know how your Missouri home has appreciated in value. After all, every bit of appreciation you've acquired over time 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 conform to national trends and/or your home might have acquired equity before things simmered down. So even when nationwide trends predict falling home values, you should know most importantly that real estate is local.
An accredited, Missouri licensed real estate appraiser can help home owners figure out just when their home's equity goes over 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 ASAP Appraisal, LLC, we're masters at determining value trends in Washington, Franklin County, and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will generally drop the PMI with little anxiety. At which 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: