Let Ashley Real Estate help you learn if you can get rid of your PMIWhen buying a house, a 20% down payment is typically the standard. Because the risk for the lender is usually only the remainder between the home value and the amount due on the loan, the 20% adds a nice buffer against the costs of foreclosure, reselling the home, and typical value variations on the chance that a purchaser doesn't pay.During the recent mortgage upturn that our country recently experienced, it was common to see lenders making deals with down payments of 10, 5 or even 0 percent. A lender is able to manage the added risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower is unable to pay on the loan and the value of the home is less than the balance of the loan. Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and on many occasions isn't even tax deductible, PMI can be expensive to a borrower. It's beneficial for the lender because they acquire the money, and they get the money if the borrower is unable to pay, unlike a piggyback loan where the lender absorbs all the damages.
How can a homebuyer avoid paying PMI?As a result of The Homeowners Protection Act of 1998, lenders are forced to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount on nearly all loans. The law pledges that, at the request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent. So, smart homeowners can get off the hook ahead of time.Because it can take many years to reach the point where the principal is just 80% of the initial amount of the loan, it's essential to know how your Mississippi home has increased in value. After all, all of the appreciation you've achieved over time counts towards dismissing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Even when nationwide trends indicate declining home values, realize that real estate is local. Your neighborhood might not be adopting the national trends and/or your home might have acquired equity before things declined. The toughest thing for most people to figure out is just when their home's equity rises above the 20% point. A certified, Mississippi licensed real estate appraiser can certainly help. It is an appraiser's job to recognize the market dynamics of their area. At Ashley Real Estate, we're masters at determining value trends in Cleveland, Bolivar County, and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will most often cancel the PMI with little anxiety. At that time, the homeowner can retain 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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