Griffin Appraisals can help you remove your Private Mortgage InsuranceA 20% down payment is typically accepted when buying a house. The lender's only risk is generally just the remainder 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 changes on the chance that a purchaser is unable to pay.During the recent mortgage boom that our country recently experienced, it was customary to see lenders reducing down payments to 10, 5 or often 0 percent. How does a lender manage the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This supplemental plan takes care of the lender if a borrower defaults on the loan and the market price of the property is less than the loan balance. PMI can be pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and oftentimes isn't even tax deductible. It's lucrative for the lender because they collect the money, and they receive payment if the borrower doesn't pay, as opposed to a piggyback loan where the lender takes in all the deficits.
How can homebuyers keep from paying PMI?The 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 initial loan amount. Savvy home owners can get off the hook ahead of time. The law stipulates that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent.Since it can take many years to get to the point where the principal is just 80% of the original amount of the loan, it's crucial to know how your Alabama home has increased in value. After all, any appreciation you've obtained over the years counts towards abolishing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood may not conform to national trends and/or your home might have gained equity before things declined. So even when nationwide trends signify declining home values, you should know most importantly that real estate is local. An accredited, Alabama licensed real estate appraiser can help home owners figure out just when their home's equity goes over the 20% point, as it's a hard thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At Griffin Appraisals, we know when property values have risen or declined. We're experts at recognizing value trends in Madison, Madison County, and surrounding areas. Faced with figures from an appraiser, the mortgage company will generally cancel the PMI with little anxiety. 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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