Appraisal Specialists of Iowa, LLC can help you remove your Private Mortgage InsuranceA 20% down payment is typically the standard when purchasing a home. Because the risk for the lender is often only the remainder between the home value and the amount remaining on the loan, the 20% adds a nice buffer against the charges of foreclosure, reselling the home, and regular value changes in the event a purchaser doesn't pay.Banks were accepting down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender handle the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower is unable to pay on the loan and the market price of the house is lower than what the borrower still owes on the loan. Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and many times isn't even tax deductible, PMI can be costly to a borrower. Instead of a piggyback loan where the lender consumes all the losses, PMI is favorable for the lender because they obtain the money, and they are covered if the borrower is unable to pay.
How can a homeowner refrain from bearing the cost of PMI?With the implementation 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 primary loan amount on most loans. Savvy homeowners can get off the hook ahead of time. The law designates that, upon request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent.It can take a significant number of years to arrive at the point where the principal is just 80% of the initial amount of the loan, so it's necessary to know how your Iowa home has appreciated in value. After all, all of the appreciation you've obtained over the years counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends signify declining home values, understand that real estate is local. Your neighborhood might not be minding the national trends and/or your home may have gained equity before things declined. The hardest thing for many consumers to determine is whether their home equity has exceeded the 20% point. A certified, Iowa licensed real estate appraiser can definitely help. As appraisers, it's our job to understand the market dynamics of our area. At Appraisal Specialists of Iowa, LLC, we're masters at recognizing value trends in our service area, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will generally do away with the PMI with little anxiety. At which 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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