Missouri Property Appraisal, Inc. can help you remove your Private Mortgage InsuranceWhen purchasing a home, a 20% down payment is usually the standard. Since the liability for the lender is often only the difference between the home value and the sum remaining on the loan, the 20% adds a nice buffer against the charges of foreclosure, selling the home again, and natural value changes in the event a borrower doesn't pay.The market was accepting 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. PMI takes care of the lender if a borrower defaults on the loan and the value of the home is less than the loan balance. PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and oftentimes isn't even tax deductible. Separate from a piggyback loan where the lender absorbs all the deficits, PMI is lucrative for the lender because they obtain the money, and they receive payment if the borrower doesn't pay.
How home owners can prevent bearing the cost of PMIThe Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Smart homeowners can get off the hook a little early. The law stipulates that, upon request of the home owner, the PMI must be released when the principal amount equals only 80 percent.It can take many years to arrive at the point where the principal is only 80% of the original amount borrowed, so it's essential to know how your Missouri home has grown in value. After all, every bit of appreciation you've gained over time counts towards removing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends signify falling home values, understand that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home may have gained equity before things declined. A certified, Missouri licensed real estate appraiser can help homeowners figure out just when their home's equity rises above the 20% point, as it's a tough thing to know. It's an appraiser's job to recognize the market dynamics of their area. At Missouri Property Appraisal, Inc., we're experts at pinpointing value trends in Fulton, Callaway County, and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will generally cancel the PMI with little trouble. At which 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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