Leah Reynolds can help you remove your Private Mortgage InsuranceWhen purchasing a home, a 20% down payment is typically the standard. The lender's risk is generally only the difference between the home value and the balance due on the loan, so the 20% supplies a nice cushion against the costs of foreclosure, reselling the home, and typical value fluctuations in the event a borrower is unable to pay.During the recent mortgage upturn that our country recently experienced, it was common to see lenders reducing down payments to 10, 5, 3 or sometimes 0 percent. How does a lender manage the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower defaults on the loan and the value of the home is lower than the balance of the loan. PMI is pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and oftentimes isn't even tax deductible. It's money-making for the lender because they acquire the money, and they get paid if the borrower is unable to pay, as opposed to a piggyback loan where the lender takes in all the losses.
How can a home owner refrain from bearing the cost of PMI?The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Smart home owners can get off the hook a little earlier. The law pledges that, upon request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent.Since it can take several years to arrive at the point where the principal is only 80% of the initial loan amount, it's necessary to know how your North Dakota home has increased in value. After all, every bit of appreciation you've accomplished over the years counts towards abolishing PMI. So why pay it after your loan balance has dropped below the 80% mark? Your neighborhood may not follow national trends and/or your home could have acquired equity before things declined. So even when nationwide trends forecast declining home values, you should understand that real estate is local. The toughest thing for almost all homeowners to figure out is whether their home equity has exceeded the 20% point. An accredited, North Dakota licensed real estate appraiser can definitely help. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Leah Reynolds, we know when property values have risen or declined. We're masters at pinpointing value trends in Mandan, Morton County, and surrounding areas. Faced with information from an appraiser, the mortgage company will often remove the PMI with little effort. 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
|
||||||||||||||||||
