Have equity in your home? Want a lower payment? An appraisal from Appraisals by Deb Lewellen can help you get rid of your PMI.It's widely inferred that a 20% down payment is accepted when purchasing a home. The lender's only liability is usually just the difference between the home value and the amount remaining on the loan, so the 20% provides a nice cushion against the charges of foreclosure, reselling the home, and natural value changes in the event a borrower defaults.During the recent mortgage boom of the mid 2000s, it became common to see lenders only asking for down payments of 10, 5, 3 or often 0 percent. A lender is able to manage the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplemental plan takes care of the lender in case a borrower is unable to pay on the loan and the market price of the property is lower than the loan balance. PMI can be pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and many times isn't even tax deductible. As opposed to a piggyback loan where the lender absorbs all the costs, PMI is profitable for the lender because they obtain the money, and they get the money if the borrower doesn't pay.
How can a home owner keep from bearing the expense of PMI?The Homeowners Protection Act of 1998 requires the lenders on the majority of loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Keen homeowners can get off the hook sooner than expected. The law pledges that, at the request of the home owner, the PMI must be released when the principal amount reaches just 80 percent.It can take many years to get to the point where the principal is only 80% of the initial amount of the loan, so it's crucial to know how your Indiana home has grown in value. After all, all of the appreciation you've gained over the years counts towards abolishing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood may not adhere to national trends and/or your home may have secured equity before the economy simmered down. So even when nationwide trends forecast falling home values, you should know most importantly that real estate is local. The difficult thing for almost all homeowners to figure out is whether their home equity has exceeded the 20% point. An accredited, Indiana licensed real estate appraiser can definitely help. It is an appraiser's job to keep up with the market dynamics of their area. At Appraisals by Deb Lewellen, we're masters at determining value trends in Lafayette, Tippecanoe 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 cancel the PMI with little anxiety. 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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