Grace and Sons Appraisal can help you remove your Private Mortgage InsuranceA 20% down payment is usually the standard when getting a mortgage. The lender's risk is generally only the difference between the home value and the balance remaining on the loan, so the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and regular value fluctuations on the chance that a purchaser doesn't pay.During the recent mortgage boom that our country recently experienced, it was widespread to see lenders only asking for down payments of 10, 5 or sometimes 0 percent. A lender is able to handle the added risk of the small down payment with 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 value of the property 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 oftentimes isn't even tax deductible, PMI can be costly to a borrower. It's favorable for the lender because they secure the money, and they receive payment if the borrower is unable to pay, as opposed to a piggyback loan where the lender consumes all the damages.
How home buyers can prevent bearing the expense of PMIWith the implementation of The Homeowners Protection Act of 1998, lenders are required to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the original loan amount on nearly all loans. Keen homeowners can get off the hook beforehand. The law guarantees that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent.It can take several years to get to the point where the principal is only 80% of the original amount borrowed, so it's crucial to know how your Oklahoma home has grown in value. After all, all of the appreciation you've achieved over time counts towards abolishing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Even when nationwide trends predict lower overall home values, understand that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home might have secured equity before things declined. The hardest thing for many people to determine is whether their home equity has exceeded the 20% point. An accredited, Oklahoma licensed real estate appraiser can surely help. It's an appraiser's job to know the market dynamics of their area. At Grace and Sons Appraisal, we're experts at recognizing value trends in Shawnee, Pottawatomie County, and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will most often cancel the PMI with little trouble. 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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