Let Lenders Appraisal Service, Inc. help you learn if you can cancel your PMI

A 20% down payment is typically the standard when buying a house. The lender's only exposure is typically just the difference between the home value and the balance outstanding on the loan, so the 20% adds a nice buffer against the charges of foreclosure, selling the home again, and typical value fluctuations on the chance that a borrower doesn't pay.

During the recent mortgage boom of the last decade, it became common to see lenders making deals with down payments of 10, 5, 3 or often 0 percent. A lender is able to endure the added risk of the small down payment with Private Mortgage Insurance or PMI. This supplemental policy takes care of the lender in case a borrower doesn't pay on the loan and the value of the house is less than what the borrower still owes on the loan.

PMI is pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and oftentimes isn't even tax deductible. It's lucrative for the lender because they obtain the money, and they get paid if the borrower is unable to pay, in contrast to a piggyback loan where the lender takes in all the losses.


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

How buyers can prevent paying PMI

The Homeowners Protection Act of 1998 obligates the lenders on the majority of loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law stipulates that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent. So, keen home owners can get off the hook sooner than expected.

It can take many years to arrive at the point where the principal is just 80% of the original amount borrowed, so it's essential to know how your Minnesota home has grown in value. After all, every bit of appreciation you've accomplished over the years counts towards removing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Even when nationwide trends indicate declining home values, be aware that real estate is local. Your neighborhood might not be heeding the national trends and/or your home might 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 difficult thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. 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 data from an appraiser, the mortgage company will usually eliminate the PMI with little anxiety. At which time, the homeowner can delight in the savings from that point on.


Is PMI a lineitem in your monthly house payment? Call Lenders Appraisal Service, Inc. today at (612) 240-2535 or send us an e-mail. A current appraisal 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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