Let Jensen Appraisal Service, Inc. help you determine if you can get rid of your PMIIt's widely known that a 20% down payment is common when purchasing a home. Since the risk for the lender is generally only the remainder between the home value and the sum remaining on the loan, the 20% provides a nice buffer against the expenses of foreclosure, reselling the home, and regular value fluctuations on the chance that a purchaser is unable to pay.During the recent mortgage boom of the mid 2000s, it became customary to see lenders reducing down payments to 10, 5, 3 or even 0 percent. How does a lender manage the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI guards the lender if a borrower defaults on the loan and the market price of the property is lower 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 bundled into the mortgage payment and many times isn't even tax deductible. Instead of a piggyback loan where the lender takes in all the costs, PMI is profitable for the lender because they acquire the money, and they get paid if the borrower defaults.
How home owners can prevent bearing the cost of PMIThe Homeowners Protection Act of 1998 requires the lenders on the majority of loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law pledges that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, keen home owners can get off the hook ahead of time.It can take many years to get to the point where the principal is only 80% of the original amount borrowed, so it's crucial to know how your South Carolina home has grown in value. After all, every bit of appreciation you've achieved over the years counts towards abolishing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not adhere to national trends and/or your home could have gained equity before the economy declined. So even when nationwide trends predict decreasing home values, you should understand that real estate is local. A certified, South Carolina licensed real estate appraiser can help home owners figure out if their equity has exceeed the 20% point, as it's a hard thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At Jensen Appraisal Service, Inc., we know when property values have risen or declined. We're masters at pinpointing value trends in Greenville, Greenville County, and surrounding areas. Faced with figures from an appraiser, the mortgage company will generally remove the PMI with little trouble. At that time, the homeowner can delight in 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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