Let Great Northern Appraisal, Inc help you determine if you can eliminate your PMIWhen purchasing a home, a 20% down payment is typically the standard. The lender's risk is often only the remainder between the home value and the balance due on the loan, so the 20% provides a nice cushion against the charges of foreclosure, selling the home again, and regular value changes on the chance that a purchaser doesn't pay.
The market was taking down payments dropping to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender endure 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 is unable to pay on the loan and the market price of the house is less than what the borrower still owes on the loan.
PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and many times isn't even tax deductible. Separate from a piggyback loan where the lender consumes all the deficits, PMI is favorable for the lender because they collect the money, and they get paid if the borrower is unable to pay.
How buyers can keep from bearing the expense of PMIWith the passage of The Homeowners Protection Act of 1998, lenders are obligated to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount on most loans. Smart homeowners can get off the hook ahead of time. The law states that, upon request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent.
It can take several years to reach the point where the principal is just 80% of the original amount of the loan, so it's essential to know how your Montana home has increased in value. After all, any appreciation you've achieved over the years counts towards dismissing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Your neighborhood may not conform to national trends and/or your home might have secured equity before things declined. So even when nationwide trends hint at declining home values, you should realize that real estate is local.
An accredited, Montana licensed real estate appraiser can help homeowners figure out if their equity has reached the 20% point, as it's a hard thing to know. It is an appraiser's job to recognize the market dynamics of their area. At Great Northern Appraisal, Inc, we're masters at determining value trends in Boise, Flathead County, and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will usually eliminate the PMI with little effort. At that time, the home owner 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