Kurt Carlson Appraiser can help you remove your Private Mortgage InsuranceA 20% down payment is usually the standard when buying a house. Considering the liability for the lender is often only the difference between the home value and the sum remaining on the loan, the 20% provides a nice cushion against the expenses of foreclosure, reselling the home, and regular value changes in the event a borrower is unable to pay.The market was accepting down payments discounted to 10, 5 and even 0 percent during the mortgage boom of the last decade. How does a lender manage the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower defaults on the loan and the market price of the property is lower than what the borrower still owes on the loan. Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and oftentimes isn't even tax deductible, PMI is costly to a borrower. Unlike a piggyback loan where the lender takes in all the costs, PMI is profitable for the lender because they obtain the money, and they are covered if the borrower doesn't pay.
How can homeowners prevent bearing the cost of PMI?With the passage of The Homeowners Protection Act of 1998, lenders are obligated to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount on nearly all loans. Wise home owners can get off the hook beforehand. The law stipulates that, at the request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent.It can take a significant number of years to reach the point where the principal is only 80% of the initial loan amount, so it's important to know how your Minnesota home has increased in value. After all, all of the appreciation you've acquired over time counts towards abolishing PMI. So why pay it after your loan balance has fallen below the 80% mark? Your neighborhood may not conform to national trends and/or your home may have secured equity before things simmered down. So even when nationwide trends signify declining home values, you should know most importantly that real estate is local. The difficult thing for almost all consumers to figure out is just when their home's equity goes over the 20% point. An accredited, Minnesota licensed real estate appraiser can certainly help. It's an appraiser's job to recognize the market dynamics of their area. At Kurt Carlson Appraiser, we know when property values have risen or declined. We're masters at pinpointing value trends in Hokah, Houston County, and surrounding areas. When faced with figures from an appraiser, the mortgage company will usually cancel the PMI with little effort. At that 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
|
||||||||||||||||||
