Have equity in your home? Want a lower payment? An appraisal from Steven Kittle Appraisals can help you get rid of your PMI.It's largely inferred that a 20% down payment is common when buying a house. The lender's only exposure is generally just the remainder between the home value and the sum due on the loan, so the 20% provides a nice cushion against the costs of foreclosure, selling the home again, and regular value changes in the event a borrower doesn't pay.
During the recent mortgage upturn of the last decade, it was widespread to see lenders making deals with down payments of 10, 5 or often 0 percent. How does a lender handle the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower doesn't pay on the loan and the value of the home is less than what the borrower still owes on the loan.
PMI is pricey to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and often isn't even tax deductible. It's beneficial for the lender because they secure the money, and they get the money if the borrower is unable to pay, unlike a piggyback loan where the lender absorbs all the damages.
How can home buyers refrain from bearing the expense of PMI?With the implementation of The Homeowners Protection Act of 1998, lenders are required to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount on nearly all loans. The law states that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent. So, wise homeowners can get off the hook sooner than expected.
It can take many years to reach the point where the principal is just 80% of the original amount of the loan, so it's crucial to know how your Missouri home has grown in value. After all, any appreciation you've gained over time counts towards abolishing PMI. So why pay it after your loan balance has fallen below the 80% mark? Even when nationwide trends signify falling home values, realize that real estate is local. Your neighborhood might not be following the national trends and/or your home could have gained equity before things declined.
An accredited, Missouri licensed real estate appraiser can help home owners figure out just when their home's equity goes over the 20% point, as it's a tough thing to know. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Steven Kittle Appraisals, we're experts at determining value trends in Springfield, Greene County, and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will usually do away with the PMI with little anxiety. At that time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: