Have equity in your home? Want a lower payment? An appraisal from Wood Appraisal Service can help you get rid of your PMI.It's largely inferred that a 20% down payment is the standard when buying a house. Considering the liability for the lender is often only the remainder between the home value and the amount due on the loan, the 20% supplies a nice buffer against the charges of foreclosure, reselling the home, and regular value variations in the event a purchaser doesn't pay.The market was working with down payments discounted to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender endure the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This added policy protects the lender in case a borrower doesn't pay on the loan and the market price of the house is lower than what the borrower still owes on the loan. Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and frequently isn't even tax deductible, PMI can be expensive to a borrower. Instead of a piggyback loan where the lender absorbs all the deficits, PMI is money-making for the lender because they obtain the money, and they receive payment if the borrower is unable to pay.
How can home buyers avoid paying PMI?The Homeowners Protection Act of 1998 forces the lenders on the majority of loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law pledges that, at the request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent. So, keen homeowners can get off the hook sooner than expected.It can take many years to arrive at the point where the principal is only 80% of the original amount of the loan, so it's necessary to know how your Alabama home has increased in value. After all, all of the appreciation you've gained over time counts towards abolishing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold? Even when nationwide trends hint at decreasing home values, realize that real estate is local. Your neighborhood might not be adopting the national trends and/or your home may have secured equity before things cooled off. A certified, Alabama licensed real estate appraiser can help homeowners figure out just when their home's equity goes over the 20% point, as it's a tough thing to know. It is an appraiser's job to keep up with the market dynamics of their area. At Wood Appraisal Service, we're experts at determining value trends in Pell City, Saint Clair County, and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will generally drop the PMI with little trouble. At that time, the home owner can enjoy 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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