Let City Realty, Inc help you learn if you can get rid of your PMIIt's widely known that a 20% down payment is common when buying a house. The lender's risk is generally only the difference between the home value and the sum due on the loan, so the 20% adds a nice cushion against the expenses of foreclosure, reselling the home, and regular value changes on the chance that a purchaser defaults.
The market was working with down payments dropping to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender manage the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This added plan takes care of the lender if a borrower is unable to pay on the loan and the value of the house is less than what the borrower still owes on the loan.
PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and on many occasions isn't even tax deductible. It's advantageous for the lender because they obtain the money, and they get the money if the borrower doesn't pay, as opposed to a piggyback loan where the lender consumes all the losses.
How can a home buyer avoid paying PMI?The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Savvy homeowners can get off the hook ahead of time. The law guarantees that, upon request of the home owner, the PMI must be released when the principal amount equals just 80 percent.
Considering it can take a significant number of years to arrive at the point where the principal is just 80% of the original amount borrowed, it's important to know how your Mississippi home has increased in value. After all, any appreciation you've gained over time counts towards abolishing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Even when nationwide trends signify declining home values, understand that real estate is local. Your neighborhood might not be heeding the national trends and/or your home may have acquired equity before things cooled off.
The difficult thing for many people to determine is just when their home's equity rises above the 20% point. An accredited, Mississippi licensed real estate appraiser can certainly help. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At City Realty, Inc, we're masters at determining value trends in Olive Branch, Desoto County, and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will usually eliminate the PMI with little effort. At that time, the homeowner can relish the savings from that point on.
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