Let Tamara Tidwell help you learn if you can eliminate your PMIWhen purchasing a home, a 20% down payment is typically the standard. Considering the risk for the lender is oftentimes only the difference between the home value and the sum due on the loan, the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and regular value changes in the event a purchaser doesn't pay.During the recent mortgage boom of the last decade, it became common to see lenders only asking for down payments of 10, 5, 3 or often 0 percent. A lender is able to handle the added risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI protects the lender in the event a borrower is unable to pay on the loan and the value of the home is less than the balance of the loan. PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and many times isn't even tax deductible. Unlike a piggyback loan where the lender consumes all the damages, PMI is advantageous for the lender because they secure the money, and they get paid if the borrower is unable to pay.
How can a homebuyer refrain from bearing the cost of PMI?The 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 reaches 78 percent of the primary loan amount. The law states that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, savvy homeowners can get off the hook a little earlier.It can take many years to reach the point where the principal is only 80% of the original amount of the loan, so it's essential to know how your Missouri home has appreciated in value. After all, any appreciation you've accomplished over time counts towards abolishing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood might not conform to national trends and/or your home might have secured equity before the economy cooled off. So even when nationwide trends forecast decreasing home values, you should realize that real estate is local. An accredited, Missouri licensed real estate appraiser can help homeowners figure out if their equity has made it to the 20% point, as it's a hard thing to know. It's an appraiser's job to recognize the market dynamics of their area. At Tamara Tidwell, we know when property values have risen or declined. We're experts at identifying value trends in Sikeston, Scott County, and surrounding areas. When faced with information from an appraiser, the mortgage company will generally remove 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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