Appraisal South can help you remove your Private Mortgage InsuranceA 20% down payment is typically accepted when purchasing a home. Because the risk for the lender is oftentimes only the remainder between the home value and the sum due on the loan, the 20% adds a nice buffer against the charges of foreclosure, reselling the home, and regular value fluctuations in the event a purchaser doesn't pay.Banks were taking down payments dropping to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender manage the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This additional plan protects the lender in case a borrower is unable to pay on the loan and the value of the property is less than what the borrower still owes on the loan. Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and many times isn't even tax deductible, PMI is costly to a borrower. It's profitable for the lender because they obtain the money, and they are covered if the borrower defaults, unlike a piggyback loan where the lender absorbs all the costs.
How can a buyer keep from bearing the cost of PMI?The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law pledges that, upon request of the home owner, the PMI must be released when the principal amount equals only 80 percent. So, keen home owners can get off the hook a little earlier.Because it can take many years to arrive at the point where the principal is just 80% of the initial loan amount, it's important to know how your Wisconsin home has increased in value. After all, any appreciation you've obtained over the years counts towards removing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood may not conform to national trends and/or your home could have gained equity before the economy declined. So even when nationwide trends indicate a reduction in home values, you should know most importantly that real estate is local. A certified, Wisconsin licensed real estate appraiser can help homeowners figure out if their equity has exceeed the 20% point, as it's a tough thing to know. It's an appraiser's job to understand the market dynamics of their area. At Appraisal South, we know when property values have risen or declined. We're masters at determining value trends in Shawano, Shawano County, and surrounding areas. Faced with information from an appraiser, the mortgage company will most often cancel the PMI with little effort. At which time, the homeowner 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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