Let Appraisal Service and Solutions, LLC help you figure out if you can cancel your PMIA 20% down payment is usually accepted when getting a mortgage. The lender's liability is often only the difference between the home value and the balance remaining on the loan, so the 20% supplies a nice cushion against the expenses of foreclosure, selling the home again, and regular value variations on the chance that a purchaser defaults.
During the recent mortgage boom that our country recently experienced, it was customary to see lenders only asking for down payments of 10, 5 or sometimes 0 percent. How does a lender handle the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This additional plan protects the lender in the event a borrower defaults on the loan and the market price 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 compiled into the mortgage monthly payment and often isn't even tax deductible. Separate from a piggyback loan where the lender takes in all the costs, PMI is beneficial for the lender because they secure the money, and they get the money if the borrower is unable to pay.
How can a home owner prevent paying PMI?The Homeowners Protection Act of 1998 forces 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 pledges that, at the request of the home owner, the PMI must be released when the principal amount reaches just 80 percent. So, smart homeowners can get off the hook sooner than expected.
Considering it can take many years to reach the point where the principal is just 80% of the original amount borrowed, it's necessary to know how your Missouri home has increased in value. After all, all of the appreciation you've obtained over the years counts towards dismissing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Your neighborhood might not follow national trends and/or your home may have gained equity before the economy simmered down. So even when nationwide trends forecast decreasing home values, you should understand that real estate is local.
The hardest thing for almost all people to figure out is whether their home equity has exceeded the 20% point. A certified, Missouri licensed real estate appraiser can surely help. As appraisers, it's our job to keep up with the market dynamics of our area. At Appraisal Service and Solutions, LLC, we know when property values have risen or declined. We're experts at identifying value trends in Lamar, Barton County, and surrounding areas. When faced with information from an appraiser, the mortgage company will often eliminate the PMI with little anxiety. At which time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: