Let Appraisal First, Inc. help you determine if you can eliminate your PMIA 20% down payment is typically the standard when buying a house. Considering the risk for the lender is usually only the remainder between the home value and the amount remaining on the loan, the 20% supplies a nice buffer against the costs of foreclosure, reselling the home, and typical value variations in the event a purchaser defaults.
The market was working with down payments discounted to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. This supplementary plan covers the lender in case a borrower defaults on the loan and the value of the property is lower than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI can be costly to a borrower. It's advantageous for the lender because they secure the money, and they receive payment if the borrower is unable to pay, in contrast to a piggyback loan where the lender consumes all the damages.
How can a homeowner keep from bearing the cost of PMI?With the passage 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 original loan amount on nearly all loans. The law stipulates that, upon request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent. So, keen home owners can get off the hook sooner than expected.
Because it can take several years to get to the point where the principal is just 80% of the initial amount of the loan, it's necessary to know how your Missouri home has appreciated in value. After all, any appreciation you've achieved over the years counts towards dismissing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood may not follow national trends and/or your home may have gained equity before things cooled off. So even when nationwide trends indicate decreasing home values, you should understand that real estate is local.
The hardest thing for most people to figure out is whether their home equity has exceeded the 20% point. An accredited, Missouri licensed real estate appraiser can certainly help. It's an appraiser's job to know the market dynamics of their area. At Appraisal First, Inc., we're experts at recognizing value trends in Springfield, Greene 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 eliminate the PMI with little effort. At that time, the homeowner can delight in the savings from that point on.
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