Haslett Appraisal can help you remove your Private Mortgage InsuranceIt's widely known that a 20% down payment is the standard when buying a house. The lender's only risk is generally just the difference between the home value and the amount remaining on the loan, so the 20% provides a nice cushion against the charges of foreclosure, selling the home again, and regular value variations in the event a borrower defaults.During the recent mortgage upturn of the last decade, 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 additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower doesn't pay on the loan and the value of the home is less than the balance of the loan. PMI can be costly 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. As opposed to a piggyback loan where the lender absorbs all the deficits, PMI is beneficial for the lender because they secure the money, and they get paid if the borrower doesn't pay.
How can a home owner keep from bearing the expense of PMI?The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Wise home owners can get off the hook sooner than expected. The law guarantees that, upon request of the home owner, the PMI must be released when the principal amount reaches just 80 percent.It can take a significant number of years to get to the point where the principal is only 80% of the original loan amount, so it's crucial to know how your North Carolina home has grown in value. After all, any appreciation you've accomplished over the years counts towards removing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% threshold? Your neighborhood may not conform to national trends and/or your home may have gained equity before things declined. So even when nationwide trends signify falling home values, you should realize that real estate is local. A certified, North Carolina 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. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Haslett Appraisal, we know when property values have risen or declined. We're experts at analyzing value trends in Mooresville, Iredell County, and surrounding areas. When faced with information from an appraiser, the mortgage company will often eliminate the PMI with little trouble. At that 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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