Let Miller Appraisals help you figure out if you can cancel your PMIWhen purchasing a home, a 20% down payment is typically the standard. Since the risk for the lender is oftentimes only the remainder between the home value and the amount outstanding on the loan, the 20% provides a nice cushion against the expenses of foreclosure, selling the home again, and regular value changes on the chance that a purchaser defaults.During the recent mortgage upturn of the mid 2000s, it was customary to see lenders only asking for down payments of 10, 5, 3 or sometimes 0 percent. A lender is able to endure the added risk of the small down payment with Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower is unable to pay on the loan and the market price of the home is lower than what the borrower still owes on the loan. PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and on many occasions 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 the money if the borrower defaults.
How home buyers can keep from bearing the expense of PMIWith the passage 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 beginning loan amount on nearly all loans. The law states that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent. So, smart home owners can get off the hook sooner than expected.Considering it can take many years to arrive at the point where the principal is just 80% of the original amount of the loan, it's important to know how your Ohio home has appreciated in value. After all, all of the appreciation you've acquired over the years counts towards abolishing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Your neighborhood might not conform to national trends and/or your home may have acquired equity before the economy simmered down. So even when nationwide trends signify a reduction in home values, you should realize that real estate is local. The toughest thing for most homeowners to determine is whether their home equity has exceeded the 20% point. A certified, Ohio licensed real estate appraiser can definitely help. As appraisers, it's our job to know the market dynamics of our area. At Miller Appraisals, we're masters at pinpointing value trends in Fremont, Sandusky County, and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will usually eliminate the PMI with little effort. At which 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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