Let Truex Residential Appraisers Inc. help you figure out if you can get rid of your PMIA 20% down payment is typically accepted when purchasing a home. The lender's only liability is generally just the difference between the home value and the sum outstanding on the loan, so the 20% supplies a nice cushion against the expenses of foreclosure, reselling the home, and natural value changes in the event a purchaser doesn't pay.During the recent mortgage upturn that our country recently experienced, it was widespread to see lenders only asking for down payments of 10, 5, 3 or sometimes 0 percent. How does a lender manage the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This added plan takes care of the lender in case a borrower doesn't pay on the loan and the value of the home is lower than the loan balance. Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and many times isn't even tax deductible, PMI is pricey to a borrower. Different from a piggyback loan where the lender absorbs all the losses, PMI is lucrative for the lender because they collect the money, and they receive payment if the borrower defaults.
How can home owners prevent bearing the expense of PMI?As a result of The Homeowners Protection Act of 1998, lenders are forced to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount on nearly all loans. Smart homeowners can get off the hook ahead of time. The law states that, at the request of the home owner, the PMI must be released when the principal amount reaches only 80 percent.Because it can take several years to arrive at the point where the principal is only 80% of the original amount borrowed, it's necessary to know how your Indiana home has appreciated in value. After all, all of the appreciation you've gained over the years counts towards removing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Your neighborhood might not conform to national trends and/or your home may have gained equity before things cooled off. So even when nationwide trends predict a reduction in home values, you should realize that real estate is local. An accredited, Indiana licensed real estate appraiser can help home owners figure out just when their home's equity rises above the 20% point, as it's a hard thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At Truex Residential Appraisers Inc., we're experts at determining value trends in Indianapolis, Marion 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 remove the PMI with little anxiety. 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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