Zim Appraisals can help you remove your Private Mortgage InsuranceWhen buying a house, a 20% down payment is usually the standard. Considering the liability for the lender is usually only the remainder between the home value and the amount remaining on the loan, the 20% provides a nice buffer against the charges of foreclosure, selling the home again, and natural value variations in the event a borrower doesn't pay.During the recent mortgage upturn that our country recently experienced, it became customary to see lenders reducing down payments to 10, 5 or sometimes 0 percent. A lender is able to endure the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower is unable to pay on the loan and the market price of the property is lower than what is owed on the loan. PMI is costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and on many occasions isn't even tax deductible. Unlike a piggyback loan where the lender takes in all the damages, PMI is lucrative for the lender because they secure the money, and they are covered if the borrower is unable to pay.
How home owners can prevent paying PMIThe Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law states that, at the request of the home owner, the PMI must be released when the principal amount reaches only 80 percent. So, savvy home owners can get off the hook ahead of time.It can take a significant number of years to reach the point where the principal is just 80% of the initial amount of the loan, so it's essential to know how your Illinois home has grown in value. After all, all of the appreciation you've acquired over the years counts towards dismissing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Even when nationwide trends indicate declining home values, be aware that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home may have acquired equity before things simmered down. An accredited, Illinois licensed real estate appraiser can help homeowners figure out if their equity has made it to the 20% point, as it's a difficult thing to know. It's an appraiser's job to recognize the market dynamics of their area. At Zim Appraisals, we know when property values have risen or declined. We're masters at pinpointing value trends in Shannon, Carroll County, and surrounding areas. When faced with data from an appraiser, the mortgage company will most often eliminate the PMI with little trouble. At which time, the homeowner 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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