Have equity in your home? Want a lower payment? An appraisal from Dattilo Appraisal & Realty Services can help you get rid of your PMI.A 20% down payment is usually the standard when buying a house. The lender's only exposure is typically just the difference between the home value and the amount outstanding on the loan, so the 20% adds a nice cushion against the charges of foreclosure, selling the home again, and regular value fluctuations on the chance that a purchaser defaults.The market was taking down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the added risk of the low down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower doesn't pay on the loan and the value of the property is less than the balance of the loan. PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and on many occasions isn't even tax deductible. Unlike a piggyback loan where the lender absorbs all the costs, PMI is beneficial for the lender because they acquire the money, and they receive payment if the borrower is unable to pay.
How can homebuyers avoid bearing the cost of PMI?With the passage of The Homeowners Protection Act of 1998, lenders are forced to automatically cease the PMI when the principal balance of the loan equals 78 percent of the original loan amount on nearly all loans. The law designates that, at the request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent. So, wise homeowners can get off the hook a little earlier.It can take several years to get to the point where the principal is just 80% of the original amount borrowed, so it's important to know how your Indiana home has grown in value. After all, all of the appreciation you've achieved over time counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Even when nationwide trends signify decreasing home values, realize that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home could have gained equity before things simmered down. A certified, Indiana licensed real estate appraiser can help homeowners figure out if their equity has exceeed the 20% point, as it's a hard thing to know. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Dattilo Appraisal & Realty Services, we're experts at determining value trends in Westville, La Porte County, and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will generally do away with the PMI with little effort. At which time, the home owner can delight in 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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