Koepke Appraisal can help you remove your Private Mortgage InsuranceA 20% down payment is typically the standard when getting a mortgage. The lender's only liability is usually just the difference between the home value and the sum remaining on the loan, so the 20% supplies a nice cushion against the costs of foreclosure, selling the home again, and natural value variations in the event a borrower is unable to pay.During the recent mortgage boom of the mid 2000s, it was common to see lenders making deals with down payments of 10, 5, 3 or even 0 percent. How does a lender endure the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower is unable to pay on the loan and the market price of the home is lower than what is owed on the loan. Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and on many occasions isn't even tax deductible, PMI can be expensive to a borrower. As opposed to a piggyback loan where the lender absorbs all the losses, PMI is advantageous for the lender because they acquire the money, and they receive payment if the borrower defaults.
How can a home buyer prevent 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 equals 78 percent of the primary loan amount on most loans. Savvy home owners can get off the hook a little early. The law guarantees that, upon request of the home owner, the PMI must be released when the principal amount equals only 80 percent.It can take many years to arrive at the point where the principal is just 80% of the initial amount of the loan, so it's crucial to know how your Nebraska home has increased in value. After all, every bit of appreciation you've gained over the years counts towards abolishing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Even when nationwide trends signify falling home values, realize that real estate is local. Your neighborhood might not be heeding the national trends and/or your home may have acquired equity before things simmered down. An accredited, Nebraska licensed real estate appraiser can help homeowners figure out if their equity has reached the 20% point, as it's a tough thing to know. It is an appraiser's job to recognize the market dynamics of their area. At Koepke Appraisal, we know when property values have risen or declined. We're experts at recognizing value trends in Aurora, Hamilton County, and surrounding areas. When faced with data from an appraiser, the mortgage company will often do away with the PMI with little trouble. At which time, the home owner can enjoy 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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