Let Appraisal Inc. help you decide if you can get rid of your PMIIt's typically inferred that a 20% down payment is the standard when getting a mortgage. Because the risk for the lender is usually only the remainder between the home value and the amount due on the loan, the 20% adds a nice cushion against the charges of foreclosure, reselling the home, and regular value fluctuations on the chance that a borrower is unable to pay.
Lenders were taking down payments discounted to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender handle the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI protects the lender if a borrower is unable to pay on the loan and the value of the home is less than what the borrower still owes on the loan.
PMI can be costly to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and on many occasions isn't even tax deductible. It's favorable for the lender because they collect the money, and they get the money if the borrower defaults, as opposed to a piggyback loan where the lender absorbs all the deficits.
How can homeowners refrain from bearing the cost of PMI?With the passage of The Homeowners Protection Act of 1998, lenders are forced to automatically stop the PMI when the principal balance of the loan equals 78 percent of the original loan amount on most loans. Smart homeowners can get off the hook beforehand. The law states that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent.
It can take many years to arrive at the point where the principal is just 80% of the original loan amount, so it's necessary to know how your North Carolina home has grown in value. After all, all of the appreciation you've acquired over the years counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Even when nationwide trends indicate declining home values, realize that real estate is local. Your neighborhood may not be following the national trends and/or your home might have gained equity before things declined.
The difficult thing for many homeowners to determine is just when their home's equity rises above the 20% point. A certified, North Carolina licensed real estate appraiser can surely help. It is an appraiser's job to recognize the market dynamics of their area. At Appraisal Inc., we know when property values have risen or declined. We're experts at determining value trends in Greenville, Pitt County, and surrounding areas. Faced with information from an appraiser, the mortgage company will usually cancel the PMI with little effort. At that time, the home owner can relish the savings from that point on.
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