Let Kirkpatrick Appraisal Services help you learn if you can eliminate your PMIWhen purchasing a home, a 20% down payment is usually the standard. The lender's risk is oftentimes only the difference between the home value and the amount remaining on the loan, so the 20% provides a nice buffer against the charges of foreclosure, selling the home again, and regular value fluctuations on the chance that a borrower defaults.
Banks were working with down payments as low as 10, 5 and even 0 percent during the mortgage boom of the last decade. A lender is able to endure the added risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower doesn't pay on the loan and the market price of the property is lower than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and often isn't even tax deductible, PMI can be pricey to a borrower. Unlike a piggyback loan where the lender takes in all the damages, PMI is favorable for the lender because they collect the money, and they receive payment if the borrower is unable to pay.
How homeowners can prevent bearing the expense of PMIWith the implementation 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 pledges that, upon request of the home owner, the PMI must be released when the principal amount equals just 80 percent. So, wise homeowners can get off the hook a little earlier.
It can take many years to reach the point where the principal is just 80% of the initial amount of the loan, so it's essential to know how your Indiana home has grown in value. After all, all of the appreciation you've accomplished over time counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% mark? Your neighborhood may not adhere to national trends and/or your home could have secured equity before the economy cooled off. So even when nationwide trends predict decreasing home values, you should realize that real estate is local.
The toughest thing for almost all homeowners to figure out is whether their home equity has exceeded the 20% point. A certified, Indiana licensed real estate appraiser can definitely help. It is an appraiser's job to know the market dynamics of their area. At Kirkpatrick Appraisal Services, we know when property values have risen or declined. We're masters at determining value trends in Fort Wayne, Allen County, and surrounding areas. When faced with data from an appraiser, the mortgage company will usually drop the PMI with little effort. At which time, the home owner can delight in the savings from that point on.
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