Let Lenders Appraisal Service, Inc. help you learn if you can eliminate your PMI
A 20% down payment is usually accepted when getting a mortgage. The lender's liability is generally only the remainder between the home value and the balance due on the loan, so the 20% provides a nice cushion against the charges of foreclosure, selling the home again, and natural value changes in the event a borrower doesn't pay.
Lenders were accepting down payments dropping to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to endure the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplementary policy guards the lender if a borrower defaults on the loan and the market price of the property is less than the loan balance.
PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and many times isn't even tax deductible. It's money-making for the lender because they secure the money, and they get paid if the borrower defaults, unlike a piggyback loan where the lender absorbs all the costs.
Does your monthly mortgage payment include a fee PMI? Call Lenders Appraisal Service, Inc. today at (612) 240-2535 or send us an e-mail. Documentation of your home's present value could save you thousands.
How homeowners can keep from bearing the cost of PMI
With 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 primary loan amount on most loans. The law guarantees that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, savvy home owners can get off the hook sooner than expected.
It can take a significant number of years to arrive at the point where the principal is just 80% of the original amount of the loan, so it's important to know how your Minnesota home has grown in value. After all, any appreciation you've acquired over the years counts towards abolishing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Your neighborhood might not follow national trends and/or your home could have gained equity before the economy cooled off. So even when nationwide trends hint at a reduction in home values, you should realize that real estate is local.
A certified, Minnesota licensed real estate appraiser can help homeowners figure out just when their home's equity rises above the 20% point, as it's a difficult thing to know. It is an appraiser's job to understand the market dynamics of their area. At Lenders Appraisal Service, Inc., we know when property values have risen or declined. We're masters at analyzing value trends in Saint Paul, Dakota County, and surrounding areas. Faced with figures from an appraiser, the mortgage company will usually cancel the PMI with little anxiety. At which time, the homeowner can relish the savings from that point on.
The money you keep from cancelling the PMI required when you got your mortgage pays for the appraisal in no time. Lenders Appraisal Service, Inc. is in the business of tracking real estate value trends in Saint Paul and Dakota County. Contact us today.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: