Have equity in your home? Want a lower payment? An appraisal from Appraisal Solutions LLC can help you get rid of your PMI.When buying a house, a 20% down payment is usually the standard. Because the risk for the lender is oftentimes only the difference between the home value and the amount outstanding 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 borrower is unable to pay.
Lenders were accepting down payments discounted to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender manage the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower is unable to pay on the loan and the value of the home is lower than what the borrower still owes on the loan.
PMI is pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and frequently isn't even tax deductible. It's advantageous for the lender because they obtain the money, and they get paid if the borrower defaults, unlike a piggyback loan where the lender absorbs all the costs.
How can homebuyers keep from paying PMI?With the passage of The Homeowners Protection Act of 1998, lenders are obligated to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount on most loans. The law stipulates that, upon request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent. So, savvy home owners can get off the hook a little earlier.
Considering it can take several years to arrive at the point where the principal is just 80% of the original amount borrowed, it's important to know how your Alabama home has increased in value. After all, all of the appreciation you've obtained over the years counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Your neighborhood might not adhere to national trends and/or your home may have acquired equity before things simmered down. So even when nationwide trends forecast falling home values, you should understand that real estate is local.
An accredited, Alabama licensed real estate appraiser can help home owners figure out just when their home's equity rises above the 20% point, as it's a hard thing to know. It is an appraiser's job to recognize the market dynamics of their area. At Appraisal Solutions LLC, we know when property values have risen or declined. We're masters at determining value trends in Dothan, Houston County, and surrounding areas. When faced with information from an appraiser, the mortgage company will generally do away with the PMI with little anxiety. At that time, the homeowner 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