Let Robison Appraisal Service, LLC help you determine if you can cancel your PMIIt's typically understood that a 20% down payment is common when buying a house. Since the risk for the lender is generally only the remainder between the home value and the sum remaining on the loan, the 20% supplies a nice buffer against the costs of foreclosure, selling the home again, and typical value variations in the event a borrower is unable to pay.During the recent mortgage upturn that our country recently experienced, it became common to see lenders reducing down payments to 10, 5 or even 0 percent. A lender is able to endure the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower defaults on the loan and the market price of the house is lower than what the borrower still owes on the loan. Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and many times isn't even tax deductible, PMI is costly to a borrower. It's lucrative for the lender because they collect the money, and they get the money if the borrower doesn't pay, in contrast to a piggyback loan where the lender consumes all the deficits.
How can a home buyer keep from paying PMI?The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law guarantees that, at the request of the home owner, the PMI must be released when the principal amount reaches just 80 percent. So, savvy homeowners can get off the hook ahead of time.Since it can take many years to reach the point where the principal is just 80% of the initial amount of the loan, it's crucial to know how your Wyoming home has appreciated 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? Your neighborhood might not follow national trends and/or your home may have gained equity before the economy declined. So even when nationwide trends forecast decreasing home values, you should understand that real estate is local. An accredited, Wyoming licensed real estate appraiser can help homeowners figure out if their equity has exceeed the 20% point, as it's a hard thing to know. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Robison Appraisal Service, LLC, we know when property values have risen or declined. We're masters at identifying value trends in Lyman, Uinta County, and surrounding areas. When faced with data from an appraiser, the mortgage company will usually drop the PMI with little effort. At which 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
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