Let Lenders Appraisal Service, Inc. help you determine if you can get rid of your PMI

When buying a house, a 20% down payment is usually the standard. Considering the liability for the lender is often only the remainder between the home value and the sum remaining on the loan, the 20% supplies a nice cushion against the charges of foreclosure, reselling the home, and natural value variations on the chance that a borrower doesn't pay.

During the recent mortgage boom of the mid 2000s, it was common to see lenders making deals with down payments of 10, 5 or often 0 percent. How does a lender handle the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This supplemental policy covers the lender in the event a borrower defaults on the loan and the market price of the home is less than the loan balance.

PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and oftentimes isn't even tax deductible. Different from a piggyback loan where the lender consumes all the deficits, PMI is money-making for the lender because they collect the money, and they are covered if the borrower doesn't pay.


Is PMI included in your monthly house payment? Call Lenders Appraisal Service, Inc. today at (612) 240-2535 or send us an e-mail. Documentation of your home's current value could save you thousands.

How can home buyers prevent bearing the expense of PMI?

With the implementation of The Homeowners Protection Act of 1998, lenders are forced to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount on nearly all loans. The law designates that, at the request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent. So, savvy home owners can get off the hook ahead of time.

Because it can take a significant number of years to get to the point where the principal is just 80% of the original loan amount, it's essential to know how your Minnesota home has appreciated in value. After all, any appreciation you've gained over the years counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Even when nationwide trends hint at lower overall home values, realize that real estate is local. Your neighborhood might not be minding the national trends and/or your home may have acquired equity before things cooled off.

An accredited, Minnesota licensed real estate appraiser can help home owners figure out just when their home's equity goes over the 20% point, as it's a tough thing to know. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Lenders Appraisal Service, Inc., we're masters at analyzing value trends in Saint Paul, Dakota 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 often do away with the PMI with little trouble. At which time, the home owner can retain the savings from that point on.


Did you secure your mortgage with less than 20% down? Call Lenders Appraisal Service, Inc. today at (612) 240-2535 to see if you can get rid of your Private Mortgage Insurance premium.

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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