Let Hayes Appraisal Group, Inc. help you discover if you can get rid of your PMIWhen buying a house, a 20% down payment is typically the standard. Since the risk for the lender is often only the difference between the home value and the sum remaining on the loan, the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and regular value variations on the chance that a purchaser defaults.
During the recent mortgage upturn of the mid 2000s, it was widespread to see lenders only asking for down payments of 10, 5 or often 0 percent. How does a lender manage the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplementary policy guards the lender in case a borrower defaults on the loan and the market price of the home is less than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and many times isn't even tax deductible, PMI can be costly to a borrower. It's lucrative for the lender because they secure the money, and they are covered if the borrower doesn't pay, as opposed to a piggyback loan where the lender takes in all the damages.
How can a homebuyer refrain from bearing the expense of PMI?The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law promises that, upon request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent. So, savvy homeowners can get off the hook a little earlier.
Since it can take several years to get to the point where the principal is only 80% of the initial amount of the loan, it's important to know how your Tennessee home has appreciated in value. After all, every bit of appreciation you've gained over time counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% mark? Even when nationwide trends signify falling home values, be aware that real estate is local. Your neighborhood might not be minding the national trends and/or your home may have secured equity before things cooled off.
A certified, Tennessee licensed real estate appraiser can help home owners figure out if their equity has exceeed the 20% point, as it's a hard thing to know. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Hayes Appraisal Group, Inc., we know when property values have risen or declined. We're masters at identifying value trends in Hermitage, Wilson County, and surrounding areas. Faced with data from an appraiser, the mortgage company will usually do away with the PMI with little anxiety. At which time, the homeowner can retain the savings from that point on.
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