Have equity in your home? Want a lower payment? An appraisal from Family Real Estate Services can help you get rid of your PMI.When buying a house, a 20% down payment is usually the standard. The lender's liability is generally only the difference between the home value and the sum outstanding on the loan, so the 20% adds a nice cushion against the costs of foreclosure, reselling the home, and typical value fluctuations in the event a purchaser doesn't pay.During the recent mortgage boom that our country recently experienced, it became widespread to see lenders only asking for down payments of 10, 5 or even 0 percent. How does a lender handle the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This added policy protects the lender in the event a borrower doesn't pay on the loan and the market price of the home is lower than what the borrower still owes on the loan. Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and often isn't even tax deductible, PMI can be expensive to a borrower. As opposed to a piggyback loan where the lender absorbs all the deficits, PMI is beneficial for the lender because they obtain the money, and they receive payment if the borrower doesn't pay.
How can a home owner prevent bearing the cost of PMI?As a result of The Homeowners Protection Act of 1998, lenders are obligated to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount on most loans. The law states that, upon request of the home owner, the PMI must be dropped when the principal amount equals just 80 percent. So, wise homeowners can get off the hook sooner than expected.It can take a significant number of years to arrive at the point where the principal is only 80% of the initial amount of the loan, so it's essential to know how your Tennessee home has appreciated in value. After all, every bit of appreciation you've accomplished over time counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Your neighborhood might not conform to national trends and/or your home might have secured equity before things declined. So even when nationwide trends predict decreasing home values, you should know most importantly that real estate is local. The hardest thing for many homeowners to figure out is whether their home equity has exceeded the 20% point. An accredited, Tennessee licensed real estate appraiser can certainly help. It is an appraiser's job to understand the market dynamics of their area. At Ronald H. Swafford Appraisal Services, we're experts at determining value trends in Pikeville, Bledsoe 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 generally drop the PMI with little effort. At which 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
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