Appraisal Review & Reports can help you remove your Private Mortgage InsuranceWhen getting a mortgage, a 20% down payment is usually the standard. Considering the risk for the lender is generally only the remainder between the home value and the sum outstanding on the loan, the 20% provides a nice buffer against the costs of foreclosure, selling the home again, and typical value fluctuations on the chance that a borrower doesn't pay.Banks were taking down payments dropping to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. A lender is able to manage the additional risk of the low down payment with Private Mortgage Insurance or PMI. This supplementary policy guards the lender in case a borrower is unable to pay on the loan and the market price of the home is lower than the loan balance. Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and on many occasions isn't even tax deductible, PMI is costly to a borrower. It's money-making for the lender because they acquire the money, and they get paid if the borrower is unable to pay, separate from a piggyback loan where the lender takes in all the damages.
How can a buyer prevent paying PMI?The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Savvy homeowners can get off the hook ahead of time. The law stipulates that, upon request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent.It can take a significant number of years to arrive at the point where the principal is just 80% of the initial amount of the loan, so it's important to know how your Tennessee home has increased in value. After all, all of the appreciation you've accomplished over the years counts towards removing PMI. So why pay it after your loan balance has dropped below the 80% mark? Even when nationwide trends signify declining home values, be aware that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home might have acquired equity before things simmered down. The hardest thing for many homeowners to figure out is just when their home's equity goes over the 20% point. A certified, Tennessee licensed real estate appraiser can definitely help. It's an appraiser's job to recognize the market dynamics of their area. At Appraisal Review & Reports, we know when property values have risen or declined. We're experts at recognizing value trends in Johnson City, Washington County, and surrounding areas. When faced with information from an appraiser, the mortgage company will usually do away with 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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