Let MJK Appraisal (330) 745-5659 help you discover if you can get rid of your PMIIt's widely understood that a 20% down payment is common when getting a mortgage. Because the liability for the lender is oftentimes only the difference between the home value and the sum outstanding on the loan, the 20% supplies a nice buffer against the charges of foreclosure, selling the home again, and typical value variations in the event a borrower doesn't pay.
Banks were accepting down payments as low as 10, 5 and frequently 0 percent during the mortgage boom of the mid 2000s. How does a lender handle the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower is unable to pay on the loan and the value of the property is less than what is owed on the loan.
PMI can be expensive to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible. Separate from a piggyback loan where the lender takes in all the losses, PMI is lucrative for the lender because they collect the money, and they get paid if the borrower doesn't pay.
How can a homeowner refrain from bearing the cost of PMI?The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Smart homeowners can get off the hook sooner than expected. The law states that, upon request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent.
It can take many years to arrive at the point where the principal is just 80% of the original loan amount, so it's important to know how your Ohio home has grown 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 the balance of your loan has dropped below the 80% mark? Even when nationwide trends indicate lower overall home values, understand that real estate is local. Your neighborhood might not be heeding the national trends and/or your home could have secured equity before things declined.
A certified, Ohio 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 is an appraiser's job to know the market dynamics of their area. At MJK Appraisal (330) 745-5659, we're masters at determining value trends in Akron, Summit County, and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will most often drop the PMI with little effort. At which time, the home owner can delight in the savings from that point on.
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