Let TFW Appraisal Services help you decide if you can cancel your PMIA 20% down payment is usually the standard when getting a mortgage. The lender's only risk is usually just the remainder between the home value and the sum due on the loan, so the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and natural value variations on the chance that a borrower defaults.During the recent mortgage upturn that our country recently experienced, it became widespread to see lenders reducing down payments to 10, 5 or sometimes 0 percent. How does a lender endure the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This additional policy protects the lender in the event a borrower defaults on the loan and the value of the house is less than the loan balance. PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and frequently isn't even tax deductible. It's beneficial for the lender because they collect the money, and they receive payment if the borrower doesn't pay, as opposed to a piggyback loan where the lender takes in all the damages.
How can a buyer avoid bearing the cost of PMI?The Homeowners Protection Act of 1998 forces the lenders on the majority of loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law states that, at the request of the home owner, the PMI must be released when the principal amount reaches just 80 percent. So, acute homeowners can get off the hook sooner than expected.Because it can take several years to reach the point where the principal is just 80% of the initial amount borrowed, it's important to know how your Tennessee home has appreciated in value. After all, any appreciation you've accomplished over time counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Even when nationwide trends hint at lower overall home values, understand that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home may have acquired equity before things declined. The hardest thing for many homeowners to figure out is whether their home equity has exceeded the 20% point. A certified, Tennessee licensed real estate appraiser can certainly help. It is an appraiser's job to keep up with the market dynamics of their area. At TFW Appraisal Services, we know when property values have risen or declined. We're masters at recognizing value trends in Oak Ridge, Anderson County, and surrounding areas. Faced with figures from an appraiser, the mortgage company will usually drop the PMI with little trouble. At which time, the homeowner can relish 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
|
||||||||||||||||||
