Helmer Appraisal can help you remove your Private Mortgage InsuranceWhen buying a house, a 20% down payment is typically the standard. Because the liability for the lender is usually only the remainder between the home value and the amount outstanding on the loan, the 20% adds a nice buffer against the expenses of foreclosure, selling the home again, and typical value changes on the chance that a borrower 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. How does a lender handle the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This added plan covers the lender if a borrower is unable to pay on the loan and the value of the home is less than what the borrower still owes on the loan. PMI can be costly to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and oftentimes isn't even tax deductible. Unlike a piggyback loan where the lender consumes all the costs, PMI is profitable for the lender because they collect the money, and they get the money if the borrower defaults.
How can a homeowner prevent paying PMI?The Homeowners Protection Act of 1998 obligates the lenders on the majority of loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law guarantees that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, wise home owners can get off the hook a little early.Considering it can take several years to reach the point where the principal is just 80% of the original amount borrowed, it's necessary to know how your Indiana home has grown in value. After all, every bit of appreciation you've acquired over time counts towards dismissing PMI. So why pay it after your loan balance has dropped below the 80% mark? Your neighborhood might not adhere to national trends and/or your home could have secured equity before the economy declined. So even when nationwide trends forecast falling home values, you should know most importantly that real estate is local. The hardest thing for most consumers to figure out is whether their home equity has exceeded the 20% point. An accredited, Indiana licensed real estate appraiser can certainly help. It's an appraiser's job to understand the market dynamics of their area. At Helmer Appraisal, we know when property values have risen or declined. We're experts at pinpointing value trends in Greencastle, Putnam County, and surrounding areas. Faced with figures from an appraiser, the mortgage company will most often drop the PMI with little effort. At that time, the home owner can enjoy 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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