Have equity in your home? Want a lower payment? An appraisal from Stewart Appraisal can help you get rid of your PMI.It's generally understood that a 20% down payment is accepted when buying a house. The lender's liability is oftentimes only the difference between the home value and the sum remaining on the loan, so the 20% provides a nice buffer against the costs of foreclosure, reselling the home, and regular value variations in the event a purchaser defaults.During the recent mortgage boom that our country recently experienced, it became common to see lenders reducing down payments to 10, 5 or often 0 percent. A lender is able to manage the added risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplemental plan takes care of the lender in case a borrower defaults on the loan and the value of the property is less than what is owed on the loan. PMI is pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and frequently isn't even tax deductible. It's lucrative for the lender because they secure the money, and they receive payment if the borrower is unable to pay, as opposed to a piggyback loan where the lender absorbs all the losses.
How homeowners can prevent paying PMIThe Homeowners Protection Act of 1998 makes the lenders on most loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law promises that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent. So, smart home owners can get off the hook a little early.Considering it can take many years to arrive at the point where the principal is just 80% of the original loan amount, it's necessary to know how your Illinois home has increased in value. After all, every bit of appreciation you've achieved 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 forecast lower overall home values, understand that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home may have gained equity before things cooled off. The difficult thing for almost all people to figure out is just when their home's equity goes over the 20% point. A certified, Illinois licensed real estate appraiser can certainly help. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Stewart Appraisal, we're experts at analyzing value trends in Ottawa, La Salle County, and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will often drop the PMI with little effort. At that time, the homeowner can relish 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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