Amis Appraisals can help you remove your Private Mortgage InsuranceWhen buying a house, a 20% down payment is usually the standard. Because the liability for the lender is often only the remainder between the home value and the amount remaining on the loan, the 20% adds a nice buffer against the expenses of foreclosure, selling the home again, and regular value fluctuations on the chance that a purchaser is unable to pay.
Banks were working with down payments dropping to 10, 5 and even 0 percent during the mortgage boom of the last decade. A lender is able to manage the added risk of the small down payment with Private Mortgage Insurance or PMI. This supplementary policy covers the lender if a borrower doesn't pay on the loan and the market price of the home is lower than the loan balance.
PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and oftentimes isn't even tax deductible. Separate from a piggyback loan where the lender absorbs all the damages, PMI is lucrative for the lender because they acquire the money, and they get paid if the borrower doesn't pay.
How homebuyers can prevent bearing the cost of PMIThe Homeowners Protection Act of 1998 makes the lenders on the majority of loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Wise homeowners can get off the hook ahead of time. The law stipulates that, at the request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent.
It can take several years to arrive at the point where the principal is only 80% of the original amount borrowed, so it's crucial to know how your Alabama home has increased in value. After all, all of the appreciation you've acquired over the years counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% threshold? Your neighborhood might not conform to national trends and/or your home may have secured equity before the economy cooled off. So even when nationwide trends indicate a reduction in home values, you should know most importantly that real estate is local.
A certified, Alabama 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. It is an appraiser's job to know the market dynamics of their area. At Amis Appraisals, we're experts at analyzing value trends in Gantt, Covington County, and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will often drop the PMI with little trouble. 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: