Have equity in your home? Want a lower payment? An appraisal from Jonathan Burke & Associates can help you get rid of your PMI.When getting a mortgage, a 20% down payment is usually the standard. Because the liability for the lender is usually only the remainder between the home value and the amount due on the loan, the 20% provides a nice buffer against the expenses of foreclosure, selling the home again, and regular value variations on the chance that a borrower defaults.During the recent mortgage boom of the mid 2000s, it became customary to see lenders only asking for down payments of 10, 5 or sometimes 0 percent. A lender is able to manage the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower doesn't pay on the loan and the market price of the home is less than the balance of the loan. Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and often isn't even tax deductible, PMI can be expensive to a borrower. Separate from a piggyback loan where the lender absorbs all the losses, PMI is beneficial for the lender because they collect the money, and they get paid if the borrower defaults.
How can a homeowner prevent paying PMI?As a result of The Homeowners Protection Act of 1998, lenders are required to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount on nearly all loans. Wise home owners can get off the hook beforehand. The law guarantees that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent.Because it can take many years to get to the point where the principal is only 80% of the original amount borrowed, it's necessary to know how your Missouri home has increased in value. After all, every bit of appreciation you've acquired over time counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Your neighborhood might not conform to national trends and/or your home may have acquired equity before things declined. So even when nationwide trends predict a reduction in home values, you should know most importantly that real estate is local. An accredited, Missouri licensed real estate appraiser can help homeowners figure out just when their home's equity goes over the 20% point, as it's a hard thing to know. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Jonathan Burke & Associates, we're masters at recognizing value trends in Saint Louis, Saint Louis County, and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will most often drop the PMI with little anxiety. At that time, the homeowner 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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