Let Steamboat Appraisals help you figure out if you can get rid of your PMIIt's typically inferred that a 20% down payment is the standard when buying a house. Considering the liability for the lender is usually only the remainder between the home value and the amount remaining on the loan, the 20% provides a nice cushion against the costs of foreclosure, selling the home again, and regular value changes on the chance that a purchaser is unable to pay.During the recent mortgage boom of the mid 2000s, it became common to see lenders only asking for down payments of 10, 5 or sometimes 0 percent. How does a lender manage the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI guards the lender if a borrower defaults on the loan and the market price 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 rolled into the mortgage monthly payment and on many occasions isn't even tax deductible. Instead of a piggyback loan where the lender takes in all the costs, PMI is profitable for the lender because they collect the money, and they are covered if the borrower is unable to pay.
How can homeowners keep from paying 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 reaches 78 percent of the beginning loan amount on nearly all loans. The law promises that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent. So, smart home owners can get off the hook a little early.Considering it can take several years to reach the point where the principal is only 80% of the original amount of the loan, it's important to know how your Wyoming home has appreciated in value. After all, any appreciation you've accomplished over time counts towards abolishing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Even when nationwide trends indicate decreasing home values, be aware that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home might have gained equity before things declined. An accredited, Wyoming licensed real estate appraiser can help home owners figure out if their equity has exceeed the 20% point, as it's a difficult thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At Steamboat Appraisals, we're experts at identifying value trends in cheyenne, Laramie 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 generally cancel the PMI with little effort. At that 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
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