Let G. Kutz Appraisals help you figure out if you can get rid of your PMIA 20% down payment is usually the standard when purchasing a home. Because the liability for the lender is usually only the remainder between the home value and the amount outstanding on the loan, the 20% provides a nice cushion against the costs of foreclosure, selling the home again, and typical value changes in the event a borrower is unable to pay.During the recent mortgage boom of the mid 2000s, it became widespread to see lenders making deals with down payments of 10, 5, 3 or even 0 percent. How does a lender endure the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This additional policy protects the lender in case a borrower is unable to pay on the loan and the market price of the property is lower than the loan balance. PMI is pricey to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and often isn't even tax deductible. It's profitable for the lender because they obtain the money, and they get paid if the borrower defaults, in contrast to a piggyback loan where the lender consumes all the damages.
How homeowners can prevent paying PMIThe Homeowners Protection Act of 1998 forces the lenders on the majority of loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Smart homeowners can get off the hook sooner than expected. The law stipulates that, upon request of the home owner, the PMI must be released when the principal amount reaches only 80 percent.It can take several years to reach the point where the principal is just 80% of the original loan amount, so it's necessary to know how your Pennsylvania home has appreciated in value. After all, all of the appreciation you've obtained over time counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% mark? Your neighborhood might not follow national trends and/or your home could have gained equity before the economy declined. So even when nationwide trends forecast decreasing home values, you should realize that real estate is local. The difficult thing for most consumers to determine is whether their home equity has exceeded the 20% point. An accredited, Pennsylvania licensed real estate appraiser can certainly help. It is an appraiser's job to understand the market dynamics of their area. At G. Kutz Appraisals, we're masters at recognizing value trends in Dallas, Luzerne County, and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will often eliminate the PMI with little anxiety. At which time, the homeowner can relish 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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