Let G.N.O. Appraisal Services help you figure out if you can cancel your PMIWhen buying a house, a 20% down payment is usually the standard. The lender's only liability is often just the remainder between the home value and the sum outstanding on the loan, so the 20% provides a nice cushion against the charges of foreclosure, reselling the home, and regular value fluctuations on the chance that a purchaser doesn't pay.The market was working with down payments discounted to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to endure the added risk of the low down payment with Private Mortgage Insurance or PMI. PMI guards the lender if a borrower defaults on the loan and the market price of the house is lower than what is owed on the loan. Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and oftentimes isn't even tax deductible, PMI can be 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, unlike a piggyback loan where the lender consumes all the losses.
How can homeowners avoid bearing the expense of PMI?As a result 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 beginning loan amount on nearly all loans. The law promises that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, wise home owners can get off the hook a little earlier.It can take several years to arrive at the point where the principal is only 80% of the original amount of the loan, so it's important to know how your Louisiana home has grown in value. After all, all of the appreciation you've achieved over time counts towards removing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood may not conform to national trends and/or your home may have gained equity before things simmered down. So even when nationwide trends signify declining home values, you should understand that real estate is local. The hardest thing for many homeowners to determine is just when their home's equity goes over the 20% point. An accredited, Louisiana licensed real estate appraiser can surely help. It's an appraiser's job to keep up with the market dynamics of their area. At G.N.O. Appraisal Services, we're experts at pinpointing value trends in Jefferson, Jefferson County, and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will generally cancel the PMI with little anxiety. At that time, the home owner 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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