Let Crescent City Appraisal Services,LLC help you decide if you can get rid of your PMIWhen buying a house, a 20% down payment is usually the standard. Because the liability for the lender is usually only the remainder between the home value and the amount outstanding on the loan, the 20% supplies a nice cushion against the expenses of foreclosure, reselling the home, and natural value fluctuations in the event a borrower doesn't pay.During the recent mortgage upturn that our country recently experienced, it was widespread to see lenders making deals with down payments of 10, 5 or even 0 percent. A lender is able to handle the added risk of the low down payment with Private Mortgage Insurance or PMI. PMI covers the lender if a borrower is unable to pay on the loan and the value of the property is less than what is owed on the loan. Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and often isn't even tax deductible, PMI is pricey to a borrower. Instead of a piggyback loan where the lender consumes all the costs, PMI is advantageous for the lender because they acquire the money, and they receive payment if the borrower doesn't pay.
How can home buyers avoid bearing the expense of PMI?With the implementation of The Homeowners Protection Act of 1998, lenders are required to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount on nearly all loans. The law stipulates that, upon request of the home owner, the PMI must be released when the principal amount equals just 80 percent. So, smart homeowners can get off the hook a little earlier.Because it can take many years to get to the point where the principal is only 80% of the original loan amount, it's important to know how your Louisiana home has increased in value. After all, any appreciation you've achieved over time counts towards removing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Your neighborhood might not adhere to national trends and/or your home may have secured equity before the economy cooled off. So even when nationwide trends indicate decreasing home values, you should understand that real estate is local. The toughest thing for most homeowners to determine is just when their home's equity goes over the 20% point. A certified, Louisiana licensed real estate appraiser can definitely help. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Crescent City Appraisal Services,LLC, we know when property values have risen or declined. We're experts at recognizing value trends in New Orleans, Orleans County, and surrounding areas. When faced with figures from an appraiser, the mortgage company will generally eliminate the PMI with little anxiety. At which 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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