Let Alpine Appraisal Company help you learn if you can cancel your PMIIt's widely known that a 20% down payment is the standard when buying a house. Since the liability for the lender is usually only the remainder between the home value and the amount outstanding on the loan, the 20% adds a nice buffer against the costs of foreclosure, selling the home again, and typical value fluctuations in the event a borrower is unable to pay.Banks were working with down payments dropping to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender endure the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This added plan covers the lender if a borrower defaults on the loan and the value of the house is less than the balance of the loan. Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and often isn't even tax deductible, PMI can be expensive to a borrower. It's beneficial for the lender because they obtain the money, and they are covered if the borrower doesn't pay, different from a piggyback loan where the lender consumes all the costs.
How can a home owner prevent paying PMI?The Homeowners Protection Act of 1998 makes the lenders on the majority of loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Smart home owners can get off the hook ahead of time. The law promises that, at the request of the homeowner, the PMI must be released when the principal amount equals only 80 percent.It can take many years to get to the point where the principal is just 80% of the initial amount borrowed, so it's important to know how your Nevada home has grown in value. After all, any appreciation you've gained over the years counts towards removing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood might not adhere to national trends and/or your home might have acquired equity before the economy declined. So even when nationwide trends hint at declining home values, you should realize that real estate is local. An accredited, Nevada licensed real estate appraiser can help homeowners figure out if their equity has exceeed the 20% point, as it's a hard thing to know. It's an appraiser's job to recognize the market dynamics of their area. At Alpine Appraisal Company, we know when property values have risen or declined. We're experts at identifying value trends in Reno, Washoe County, and surrounding areas. When faced with information from an appraiser, the mortgage company will often do away with the PMI with little trouble. At that time, the home owner can delight in 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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