Let a la mode, inc. - tjhliveapprent help you determine if you can cancel your PMI2When getting a mortgage, a 20% down payment is usually the standard. Since the liability for the lender is generally only the remainder between the home value and the sum due on the loan, the 20% adds a nice cushion against the expenses of foreclosure, selling the home again, and regular value fluctuations in the event a purchaser doesn't pay.Banks were accepting down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. This additional plan guards the lender in the event a borrower defaults on the loan and the market price of the house is lower than the balance of the loan. PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and oftentimes isn't even tax deductible. Unlike a piggyback loan where the lender absorbs all the costs, PMI is beneficial for the lender because they collect the money, and they get paid if the borrower defaults.
How can a home buyer refrain from bearing the cost of PMI?The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law designates that, upon request of the home owner, the PMI must be released when the principal amount reaches only 80 percent. So, wise home owners can get off the hook a little early.It can take a significant number of years to get to the point where the principal is only 80% of the original amount of the loan, so it's essential to know how your Oklahoma home has appreciated in value. After all, all of the appreciation you've achieved over the years counts towards removing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Your neighborhood may not adhere to national trends and/or your home might have acquired equity before the economy declined. So even when nationwide trends indicate a reduction in home values, you should know most importantly that real estate is local. The toughest thing for many homeowners to figure out is whether their home equity has exceeded the 20% point. A certified, Oklahoma licensed real estate appraiser can surely help. As appraisers, it's our job to keep up with the market dynamics of our area. At a la mode, inc. - tjhliveapprent, we know when property values have risen or declined. We're masters at analyzing value trends in Midwest City, Oklahoma County, and surrounding areas. When faced with figures from an appraiser, the mortgage company will often remove the PMI with little anxiety. At that 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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