Have equity in your home? Want a lower payment? An appraisal from The Property Shop of the Carolinas, LLC. can help you get rid of your PMI.When purchasing a home, a 20% down payment is typically the standard. Considering the liability for the lender is often only the remainder between the home value and the amount outstanding on the loan, the 20% adds a nice buffer against the charges of foreclosure, selling the home again, and typical value variations on the chance that a purchaser doesn't pay.During the recent mortgage boom that our country recently experienced, it was widespread to see lenders making deals with down payments of 10, 5, 3 or often 0 percent. How does a lender handle the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender if a borrower defaults on the loan and the market price of the home is lower than the balance of the loan. Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and many times isn't even tax deductible, PMI can be pricey to a borrower. Different from a piggyback loan where the lender takes in all the losses, PMI is advantageous for the lender because they acquire the money, and they get the money if the borrower defaults.
How home buyers can prevent bearing the cost of PMIThe Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Acute homeowners can get off the hook a little earlier. The law stipulates that, at the request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent.Since it can take a significant number of years to arrive at the point where the principal is just 80% of the original amount of the loan, it's important to know how your North Carolina home has grown in value. After all, every bit of appreciation you've obtained over the years counts towards abolishing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Even when nationwide trends indicate falling home values, be aware 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 simmered down. A certified, North Carolina licensed real estate appraiser can help home owners figure out just when their home's equity rises above the 20% point, as it's a difficult thing to know. It is an appraiser's job to keep up with the market dynamics of their area. At The Property Shop of the Carolinas, LLC., we're experts at identifying value trends in Wilmington, New Hanover County, and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will most often cancel the PMI with little effort. 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
|
||||||||||||||||||
