Let Cooper Turner Appraisals, Inc. help you discover if you can get rid of your PMIIt's widely understood that a 20% down payment is accepted when buying a house. Because the liability for the lender is oftentimes only the remainder between the home value and the amount due on the loan, the 20% adds a nice cushion against the charges of foreclosure, reselling the home, and regular value variations in the event a borrower is unable to pay.During the recent mortgage upturn of the last decade, it became customary to see lenders reducing down payments to 10, 5 or sometimes 0 percent. How does a lender endure the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI protects the lender in the event a borrower is unable to pay on the loan and the value of the home is lower than what is owed on the loan. PMI can be pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and oftentimes isn't even tax deductible. It's lucrative for the lender because they obtain the money, and they get the money if the borrower doesn't pay, as opposed to a piggyback loan where the lender consumes all the damages.
How home buyers can avoid paying PMIWith the implementation of The Homeowners Protection Act of 1998, lenders are obligated to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount on most loans. Keen homeowners can get off the hook a little earlier. The law pledges that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent.Considering it can take a significant number of years to arrive at the point where the principal is just 80% of the original amount borrowed, it's crucial to know how your Tennessee home has increased 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 indicate declining home values, realize that real estate is local. Your neighborhood may not be adopting the national trends and/or your home might have gained equity before things simmered down. The hardest thing for almost all homeowners to figure out is whether their home equity has exceeded the 20% point. An accredited, Tennessee licensed real estate appraiser can certainly help. It is an appraiser's job to keep up with the market dynamics of their area. At Cooper Turner Appraisals, Inc., we know when property values have risen or declined. We're masters at identifying value trends in Memphis, Shelby County, and surrounding areas. When faced with information from an appraiser, the mortgage company will generally do away with the PMI with little effort. At that time, the home owner can retain 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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