Have equity in your home? Want a lower payment? An appraisal from Bales Appraisals can help you get rid of your PMI.It's typically known that a 20% down payment is common when purchasing a home. The lender's only risk is often just the remainder between the home value and the balance remaining on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and typical value fluctuations in the event a purchaser is unable to pay.
During the recent mortgage upturn of the mid 2000s, it was customary to see lenders only asking for down payments of 10, 5, 3 or even 0 percent. How does a lender endure the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This added plan guards the lender in the event a borrower defaults on the loan and the value of the property is lower than the loan balance.
PMI can be costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and on many occasions isn't even tax deductible. It's beneficial for the lender because they collect the money, and they receive payment if the borrower doesn't pay, separate from a piggyback loan where the lender consumes all the losses.
How can a home owner refrain from bearing the cost of PMI?With the passage of The Homeowners Protection Act of 1998, lenders are forced to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount on nearly all loans. Keen home owners can get off the hook beforehand. The law guarantees that, at the request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent.
It can take a significant number of years to get to the point where the principal is only 80% of the initial amount borrowed, so it's necessary to know how your Oklahoma home has increased in value. After all, every bit of appreciation you've gained over time counts towards removing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Your neighborhood may not follow national trends and/or your home could have acquired equity before the economy cooled off. So even when nationwide trends forecast declining home values, you should know most importantly that real estate is local.
The difficult thing for most homeowners to determine is just when their home's equity rises above the 20% point. An accredited, Oklahoma licensed real estate appraiser can definitely help. It is an appraiser's job to understand the market dynamics of their area. At Bales Appraisals, we're experts at determining value trends in Tulsa, Tulsa County, and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will generally eliminate the PMI with little anxiety. At which time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: