Have equity in your home? Want a lower payment? An appraisal from Tyler Newton & Associates can help you get rid of your PMI.A 20% down payment is typically accepted when purchasing a home. Considering the risk for the lender is generally only the difference between the home value and the amount due on the loan, the 20% supplies a nice buffer against the costs of foreclosure, selling the home again, and natural value fluctuations in the event a purchaser doesn't pay.The market was accepting down payments discounted to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. How does a lender manage the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower doesn't pay on the loan and the market price of the home is lower than the loan balance. Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and often isn't even tax deductible, PMI can be expensive to a borrower. Different from a piggyback loan where the lender consumes all the costs, PMI is money-making for the lender because they obtain the money, and they are covered if the borrower doesn't pay.
How homeowners can prevent paying PMIWith the passage of The Homeowners Protection Act of 1998, lenders are forced to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount on most loans. The law states that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, smart homeowners can get off the hook sooner than expected.Because it can take a significant number of years to get to the point where the principal is just 80% of the original loan amount, it's essential to know how your Michigan home has increased in value. After all, all of the appreciation you've gained over the years counts towards removing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Your neighborhood might not follow national trends and/or your home could have secured equity before the economy simmered down. So even when nationwide trends forecast declining home values, you should know most importantly that real estate is local. The hardest thing for many consumers to determine is just when their home's equity rises above the 20% point. An accredited, Michigan licensed real estate appraiser can certainly help. It is an appraiser's job to understand the market dynamics of their area. At Tyler Newton & Associates, we're experts at recognizing value trends in Muskegon, Muskegon 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 usually do away with the PMI with little anxiety. At that time, the homeowner can enjoy 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
|
||||||||||||||||||
