Accredited Appraisal Services, LLC can help you remove your Private Mortgage InsuranceIt's typically inferred that a 20% down payment is common when purchasing a home. The lender's risk is generally only the remainder between the home value and the sum outstanding on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, reselling the home, and regular value variations on the chance that a borrower is unable to pay.
Lenders were working with down payments dropping to 10, 5 and frequently 0 percent during the mortgage boom of the mid 2000s. A lender is able to endure the added risk of the small down payment with Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower is unable to pay on the loan and the market price of the home is less than the balance of the loan.
PMI can be expensive to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and oftentimes isn't even tax deductible. Separate from a piggyback loan where the lender takes in all the damages, PMI is lucrative for the lender because they collect the money, and they get paid if the borrower is unable to pay.
How can a buyer refrain from bearing the cost of PMI?The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law designates that, upon request of the home owner, the PMI must be released when the principal amount equals just 80 percent. So, savvy homeowners can get off the hook ahead of time.
It can take many years to arrive at the point where the principal is just 80% of the original amount of the loan, so it's essential to know how your Oklahoma home has increased in value. After all, any appreciation you've obtained over the years counts towards removing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Even when nationwide trends indicate lower overall home values, be aware that real estate is local. Your neighborhood might not be adopting the national trends and/or your home might have acquired equity before things cooled off.
The difficult thing for almost all homeowners to figure out is whether their home equity has exceeded the 20% point. An accredited, Oklahoma licensed real estate appraiser can certainly help. As appraisers, it's our job to understand the market dynamics of our area. At Accredited Appraisal Services, LLC, we know when property values have risen or declined. We're masters at identifying value trends in Tulsa, Tulsa County, and surrounding areas. When faced with figures from an appraiser, the mortgage company will often do away with the PMI with little trouble. At that 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: