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

When purchasing a home, a 20% down payment is usually the standard. Considering the risk for the lender is generally only the difference between the home value and the amount remaining on the loan, the 20% supplies a nice cushion against the expenses of foreclosure, reselling the home, and natural value variations on the chance that a purchaser defaults.

During the recent mortgage upturn that our country recently experienced, it became widespread to see lenders making deals with down payments of 10, 5 or often 0 percent. A lender is able to endure the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplemental policy protects the lender in the event a borrower doesn't pay on the loan and the value of the property is less than what the borrower still owes on the loan.

Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and often isn't even tax deductible, PMI can be costly to a borrower. It's advantageous for the lender because they acquire the money, and they receive payment if the borrower is unable to pay, different from a piggyback loan where the lender absorbs all the damages.


Did you have less than 20% to put down on your mortgage? Call Lenders Appraisal Service, Inc. today at (612) 240-2535. You may be able to cancel your Private Mortgage Insurance payment.

How can home owners keep from bearing the cost of PMI?

With the implementation of The Homeowners Protection Act of 1998, lenders are forced to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount on nearly all loans. The law pledges that, upon request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent. So, smart home owners can get off the hook sooner than expected.

It can take many years to arrive at the point where the principal is only 80% of the original loan amount, so it's important to know how your Minnesota home has appreciated in value. After all, any appreciation you've gained over time counts towards removing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Even when nationwide trends hint at decreasing home values, be aware that real estate is local. Your neighborhood may not be minding the national trends and/or your home may have acquired equity before things cooled off.

The toughest thing for almost all people to determine is just when their home's equity goes over the 20% point. An accredited, Minnesota licensed real estate appraiser can certainly help. It is an appraiser's job to know the market dynamics of their area. At Lenders Appraisal Service, Inc., we know when property values have risen or declined. We're experts at recognizing value trends in Saint Paul, Dakota County, and surrounding areas. Faced with information from an appraiser, the mortgage company will often cancel the PMI with little anxiety. At that time, the home owner can retain the savings from that point on.


Is PMI something increasing your monthly mortgage 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.

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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