Have equity in your home? Want a lower payment? An appraisal from Feicht R.E. and Appraisal, LLC. can help you get rid of your PMI.A 20% down payment is typically accepted when buying a house. The lender's liability is oftentimes only the remainder between the home value and the balance outstanding on the loan, so the 20% provides a nice cushion against the expenses of foreclosure, selling the home again, and natural value changes on the chance that a purchaser defaults.
During the recent mortgage boom of the last decade, it became customary 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. PMI takes care of the lender in the event a borrower is unable to pay on the loan and the market price of the property is lower than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and on many occasions isn't even tax deductible, PMI is costly to a borrower. Instead of a piggyback loan where the lender absorbs all the deficits, PMI is favorable for the lender because they collect the money, and they get paid if the borrower is unable to pay.
How can home buyers prevent bearing the cost of PMI?With the passage of The Homeowners Protection Act of 1998, lenders are obligated to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount on nearly all loans. The law guarantees that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, wise homeowners can get off the hook sooner than expected.
Since it can take a significant number of years to reach the point where the principal is only 80% of the initial amount of the loan, it's crucial to know how your Missouri home has grown in value. After all, any appreciation you've gained over the years counts towards abolishing PMI. So why pay it after your loan balance has fallen below the 80% mark? Even when nationwide trends predict falling home values, be aware that real estate is local. Your neighborhood might not be heeding the national trends and/or your home could have secured equity before things declined.
The toughest thing for most consumers to determine is just when their home's equity rises above the 20% point. A certified, Missouri licensed real estate appraiser can definitely help. It is an appraiser's job to understand the market dynamics of their area. At Feicht R.E. and Appraisal, LLC., we're masters at analyzing value trends in Saint Louis, Saint Louis County, and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will often cancel the PMI with little effort. At which time, the homeowner 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