Let Nathan Wallace Appraisals help you learn if you can eliminate your PMIA 20% down payment is typically accepted when getting a mortgage. The lender's only risk is typically just the difference between the home value and the amount due on the loan, so the 20% adds a nice buffer against the costs of foreclosure, reselling the home, and regular value fluctuations in the event a borrower is unable to pay.
The market was taking down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender manage the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This additional plan guards the lender in case a borrower defaults on the loan and the value of the house is lower than the balance of the loan.
PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and many times isn't even tax deductible. It's money-making for the lender because they secure the money, and they get the money if the borrower doesn't pay, as opposed to a piggyback loan where the lender absorbs all the deficits.
How can homeowners prevent paying PMI?With the passage of The Homeowners Protection Act of 1998, lenders are obligated to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the original loan amount on most loans. Keen home owners can get off the hook sooner than expected. The law promises that, upon request of the home owner, the PMI must be released when the principal amount equals just 80 percent.
It can take many years to reach the point where the principal is only 80% of the original loan amount, so it's essential to know how your Alabama home has increased in value. After all, all of the appreciation you've obtained over the years counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% mark? Your neighborhood may not conform to national trends and/or your home may have secured equity before things cooled off. So even when nationwide trends predict declining home values, you should realize that real estate is local.
The difficult thing for many homeowners to determine is just when their home's equity goes over the 20% point. A certified, Alabama licensed real estate appraiser can certainly help. As appraisers, it's our job to recognize the market dynamics of our area. At Nathan Wallace Appraisals, we know when property values have risen or declined. We're masters at analyzing value trends in Dothan, Houston County, and surrounding areas. Faced with figures from an appraiser, the mortgage company will most often do away with the PMI with little trouble. At that 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