Let Linday's Appraisals LLC help you figure out if you can get rid of your PMIIt's widely inferred that a 20% down payment is accepted when purchasing a home. Since the liability for the lender is often only the difference between the home value and the sum remaining on the loan, the 20% adds a nice cushion against the costs of foreclosure, reselling the home, and natural value fluctuations on the chance that a purchaser is unable to pay.Lenders were taking down payments dropping to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender handle the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower is unable to pay on the loan and the market price of the property is lower than what is owed on the loan. Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and many times isn't even tax deductible, PMI can be pricey to a borrower. Unlike a piggyback loan where the lender takes in all the losses, PMI is profitable for the lender because they collect the money, and they get the money if the borrower doesn't pay.
How can buyers refrain from bearing the expense of PMI?The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law states that, upon request of the homeowner, the PMI must be released when the principal amount equals just 80 percent. So, smart home owners can get off the hook a little early.It can take many years to reach the point where the principal is only 80% of the original amount borrowed, so it's important to know how your Missouri home has appreciated in value. After all, all of the appreciation you've achieved over the years counts towards dismissing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Your neighborhood may not adhere to national trends and/or your home could have acquired equity before the economy declined. So even when nationwide trends hint at declining home values, you should realize that real estate is local. A certified, Missouri licensed real estate appraiser can help home owners figure out if their equity has made it to the 20% point, as it's a difficult thing to know. As appraisers, it's our job to understand the market dynamics of our area. At Linday's Appraisals LLC, we know when property values have risen or declined. We're experts at recognizing value trends in Columbia, Boone County, and surrounding areas. Faced with information from an appraiser, the mortgage company will most often eliminate the PMI with little effort. At that time, the home owner can retain 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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