Have equity in your home? Want a lower payment? An appraisal from Turner Consulting & Evaluation can help you get rid of your PMI.It's typically inferred that a 20% down payment is accepted when buying a house. Since the risk for the lender is often only the difference between the home value and the amount due on the loan, the 20% provides a nice cushion against the costs of foreclosure, selling the home again, and typical value changes on the chance that a purchaser doesn't pay.
During the recent mortgage boom that our country recently experienced, it was widespread to see lenders reducing down payments to 10, 5 or sometimes 0 percent. A lender is able to endure the added risk of the minimal down payment with Private Mortgage Insurance or PMI. This added plan guards the lender in the event a borrower is unable to pay on the loan and the value of the house is lower than what the borrower still owes on the loan.
PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and oftentimes isn't even tax deductible. Unlike a piggyback loan where the lender takes in all the losses, PMI is advantageous for the lender because they secure the money, and they get the money if the borrower is unable to pay.
How home owners can avoid paying PMIThe Homeowners Protection Act of 1998 requires the lenders on the majority of loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Keen homeowners can get off the hook ahead of time. The law pledges that, at the request of the home owner, the PMI must be dropped when the principal amount reaches only 80 percent.
Since it can take many years to reach the point where the principal is just 80% of the initial amount of the loan, it's essential to know how your Oregon home has increased in value. After all, all of the appreciation you've accomplished over time counts towards abolishing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends indicate declining home values, realize that real estate is local. Your neighborhood might not be adopting the national trends and/or your home could have gained equity before things declined.
An accredited, Oregon licensed real estate appraiser can help homeowners figure out if their equity has reached the 20% point, as it's a difficult thing to know. It's an appraiser's job to keep up with the market dynamics of their area. At Turner Consulting & Evaluation, we're experts at recognizing value trends in Coos Bay, Coos 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 usually drop the PMI with little anxiety. At which 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