Let Ballenger Realtors help you figure out if you can get rid of your PMIWhen buying a house, a 20% down payment is usually the standard. The lender's risk is often only the remainder between the home value and the sum remaining on the loan, so the 20% adds a nice buffer against the charges of foreclosure, reselling the home, and regular value fluctuations in the event a purchaser defaults.
The market was taking down payments dropping to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. A lender is able to handle the added risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower doesn't pay on the loan and the value of the home is less than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and on many occasions isn't even tax deductible, PMI is pricey to a borrower. Unlike a piggyback loan where the lender absorbs all the deficits, PMI is profitable for the lender because they acquire the money, and they get the money if the borrower is unable to pay.
How can buyers keep from bearing the expense of PMI?The Homeowners Protection Act of 1998 makes the lenders on the majority of loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Keen home owners can get off the hook ahead of time. The law promises that, upon request of the home owner, the PMI must be dropped when the principal amount reaches only 80 percent.
Since it can take many years to reach the point where the principal is only 80% of the initial amount of the loan, it's important to know how your Tennessee home has increased in value. After all, all of the appreciation you've obtained over time counts towards abolishing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold? Even when nationwide trends indicate decreasing home values, realize that real estate is local. Your neighborhood may not be adopting the national trends and/or your home might have gained equity before things cooled off.
The hardest thing for almost all people to determine is just when their home's equity goes over the 20% point. An accredited, Tennessee licensed real estate appraiser can surely help. It's an appraiser's job to understand the market dynamics of their area. At Ballenger Realtors, we know when property values have risen or declined. We're experts at analyzing value trends in Knoxville, Knox County, and surrounding areas. Faced with figures from an appraiser, the mortgage company will generally cancel the PMI with little trouble. At that time, the homeowner can delight in the savings from that point on.
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