Let a la mode, inc. help you discover if you can eliminate your PMIIt's largely inferred that a 20% down payment is common when purchasing a home. The lender's risk is often only the remainder between the home value and the sum remaining on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, reselling the home, and typical value variations in the event a borrower is unable to pay.During the recent mortgage upturn that our country recently experienced, it was customary to see lenders only asking for down payments of 10, 5 or even 0 percent. A lender is able to handle the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI guards the lender if a borrower doesn't pay on the loan and the value of the property is less than the loan balance. Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and on many occasions isn't even tax deductible, PMI is pricey to a borrower. It's lucrative for the lender because they collect the money, and they get paid if the borrower doesn't pay, in contrast to a piggyback loan where the lender absorbs all the costs.
How can a home buyer avoid bearing the expense of PMI?With the passage of The Homeowners Protection Act of 1998, lenders are required to automatically stop the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount on most loans. The law stipulates that, at the request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent. So, keen homeowners can get off the hook ahead of time.It can take many years to reach the point where the principal is only 80% of the original amount of the loan, so it's necessary to know how your Oklahoma home has grown in value. After all, any appreciation you've gained over the years counts towards dismissing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends forecast falling home values, be aware that real estate is local. Your neighborhood may not be minding the national trends and/or your home could have secured equity before things declined. The difficult thing for many people to figure out is whether their home equity has exceeded the 20% point. A certified, Oklahoma licensed real estate appraiser can certainly help. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At a la mode, inc., we're masters at pinpointing value trends in Oklahoma City, Oklahoma 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 generally do away with the PMI with little effort. At which time, the homeowner can delight in the savings from that point on.
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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