Let Owens Appraisal Service LLC help you decide if you can get rid of your PMIA 20% down payment is typically the standard when getting a mortgage. The lender's only liability is often just the difference between the home value and the sum remaining on the loan, so the 20% provides a nice cushion against the expenses of foreclosure, selling the home again, and regular value fluctuations on the chance that a purchaser doesn't pay.During the recent mortgage boom of the last decade, it became common to see lenders reducing down payments to 10, 5, 3 or often 0 percent. A lender is able to endure the additional risk of the low down payment with Private Mortgage Insurance or PMI. PMI guards the lender if a borrower defaults on the loan and the market price of the house is less than the balance of the loan. PMI can be costly to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and often isn't even tax deductible. It's lucrative for the lender because they acquire the money, and they get paid if the borrower doesn't pay, as opposed to a piggyback loan where the lender takes in all the deficits.
How can a buyer avoid paying PMI?The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Savvy homeowners can get off the hook sooner than expected. The law stipulates that, at the request of the home owner, the PMI must be dropped when the principal amount reaches only 80 percent.Since it can take a significant number of years to get to the point where the principal is only 80% of the original amount of the loan, it's necessary to know how your New Mexico home has grown in value. After all, all of the appreciation you've acquired over the years counts towards dismissing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood may not follow national trends and/or your home could have acquired equity before the economy simmered down. So even when nationwide trends signify declining home values, you should realize that real estate is local. A certified, New Mexico licensed real estate appraiser can help homeowners figure out just when their home's equity goes over the 20% point, as it's a difficult thing to know. It is an appraiser's job to keep up with the market dynamics of their area. At Owens Appraisal Service LLC, we know when property values have risen or declined. We're masters at identifying value trends in Rio Rancho, Sandoval County, and surrounding areas. When faced with data from an appraiser, the mortgage company will usually do away with the PMI with little trouble. At that time, the home owner can retain 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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