Have equity in your home? Want a lower payment? An appraisal from Steinley Real Estate Appraisals can help you get rid of your PMI.It's generally known that a 20% down payment is accepted when purchasing a home. The lender's liability is oftentimes only the remainder between the home value and the amount outstanding on the loan, so the 20% supplies a nice buffer against the expenses of foreclosure, selling the home again, and regular value variations on the chance that a purchaser defaults.During the recent mortgage upturn that our country recently experienced, it was customary to see lenders making deals with down payments of 10, 5, 3 or even 0 percent. How does a lender handle the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower is unable to pay on the loan and the market price of the property is lower than the loan balance. PMI is pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and many times isn't even tax deductible. It's profitable for the lender because they acquire the money, and they receive payment if the borrower defaults, separate from a piggyback loan where the lender takes in all the damages.
How can a home owner keep from paying PMI?As a result of The Homeowners Protection Act of 1998, lenders are required to automatically cease the PMI when the principal balance of the loan equals 78 percent of the original loan amount on nearly all loans. The law guarantees that, at the request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent. So, keen homeowners can get off the hook a little earlier.It can take a significant number of years to arrive at the point where the principal is only 80% of the initial amount borrowed, so it's important to know how your South Dakota home has increased in value. After all, all of the appreciation you've obtained over the years counts towards dismissing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Even when nationwide trends forecast falling home values, realize that real estate is local. Your neighborhood may not be heeding the national trends and/or your home may have acquired equity before things cooled off. An accredited, South Dakota licensed real estate appraiser can help home owners 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 know the market dynamics of their area. At Steinley Real Estate Appraisals, we know when property values have risen or declined. We're masters at recognizing value trends in Rapid City, Pennington County, and surrounding areas. Faced with information from an appraiser, the mortgage company will most often cancel the PMI with little effort. At that time, the home owner 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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