Residential Appraisal Resource can help you remove your Private Mortgage InsuranceIt's largely known that a 20% down payment is accepted when buying a house. The lender's liability is oftentimes only the difference between the home value and the sum outstanding on the loan, so the 20% supplies a nice buffer against the charges of foreclosure, reselling the home, and natural value variations on the chance that a purchaser doesn't pay.Lenders were taking down payments discounted to 10, 5 and frequently 0 percent during the mortgage boom of the last decade. How does a lender endure the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplemental policy protects the lender in case a borrower doesn't pay on the loan and the value of the house is less than the balance of the loan. PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and often isn't even tax deductible. Unlike a piggyback loan where the lender takes in all the costs, PMI is beneficial for the lender because they secure the money, and they are covered if the borrower defaults.
How can home buyers avoid paying PMI?The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law promises that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent. So, savvy homeowners can get off the hook a little early.It can take a significant number of years to reach the point where the principal is only 80% of the initial loan amount, so it's necessary to know how your Louisiana home has increased in value. After all, every bit of appreciation you've accomplished over the years counts towards removing PMI. So why pay it after your loan balance has dropped below the 80% mark? Even when nationwide trends hint at lower overall home values, understand that real estate is local. Your neighborhood might not be heeding the national trends and/or your home might have acquired equity before things declined. The hardest thing for most consumers to figure out is whether their home equity has exceeded the 20% point. An accredited, Louisiana licensed real estate appraiser can certainly help. As appraisers, it's our job to recognize the market dynamics of our area. At Residential Appraisal Resource, we know when property values have risen or declined. We're masters at determining value trends in Mandeville, Saint Tammany County, and surrounding areas. When faced with figures from an appraiser, the mortgage company will often cancel the PMI with little effort. At which time, the home owner 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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