Have equity in your home? Want a lower payment? An appraisal from Accurate Appraisals (816) 351-2637 can help you get rid of your PMI.A 20% down payment is typically the standard when purchasing a home. The lender's only exposure is typically just the difference between the home value and the sum due on the loan, so the 20% adds a nice buffer against the costs of foreclosure, reselling the home, and typical value variations on the chance that a purchaser is unable to pay.
During the recent mortgage boom of the mid 2000s, it became customary to see lenders only asking for down payments of 10, 5, 3 or often 0 percent. A lender is able to endure the added risk of the small down payment with Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower defaults on the loan and the market price of the property is lower than what the borrower still owes on the loan.
PMI is pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and oftentimes isn't even tax deductible. It's lucrative for the lender because they obtain the money, and they receive payment if the borrower doesn't pay, in contrast to a piggyback loan where the lender takes in all the deficits.
How can a buyer prevent paying PMI?The Homeowners Protection Act of 1998 makes the lenders on the majority of loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law guarantees that, at the request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent. So, smart home owners can get off the hook ahead of time.
It can take a significant number of years to get to the point where the principal is only 80% of the original amount of the loan, so it's necessary to know how your Missouri home has increased in value. After all, every bit of appreciation you've accomplished over the years counts towards removing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Your neighborhood may not follow national trends and/or your home might have secured equity before the economy declined. So even when nationwide trends forecast decreasing home values, you should realize that real estate is local.
A certified, Missouri licensed real estate appraiser can help home owners figure out just when their home's equity rises above the 20% point, as it's a difficult thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At Accurate Appraisals (816) 351-2637, we know when property values have risen or declined. We're masters at analyzing value trends in St Joseph, Buchanan County, and surrounding areas. Faced with figures from an appraiser, the mortgage company will usually drop the PMI with little trouble. At that time, the home owner can relish the savings from that point on.
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