Have equity in your home? Want a lower payment? An appraisal from Kane Appraisal & Real Estate Services, Inc. can help you get rid of your PMI.A 20% down payment is typically accepted when purchasing a home. Because the risk for the lender is generally only the remainder between the home value and the amount outstanding on the loan, the 20% provides a nice cushion against the expenses of foreclosure, reselling the home, and typical value variations in the event a borrower defaults.During the recent mortgage boom of the mid 2000s, it became customary to see lenders making deals with down payments of 10, 5 or even 0 percent. A lender is able to endure the additional risk of the low down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower doesn't pay on the loan and the market price of the home is less than the balance of the loan. PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and many times isn't even tax deductible. It's beneficial for the lender because they secure the money, and they get the money if the borrower is unable to pay, unlike a piggyback loan where the lender takes in all the losses.
How can a home buyer prevent paying PMI?With the passage 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 original loan amount on most loans. The law stipulates that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, wise home owners can get off the hook a little early.Since it can take several years to arrive at the point where the principal is just 80% of the initial amount of the loan, it's crucial to know how your Iowa home has increased in value. After all, any appreciation you've gained over the years counts towards abolishing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Your neighborhood might not adhere to national trends and/or your home may have acquired equity before things cooled off. So even when nationwide trends predict a reduction in home values, you should understand that real estate is local. An accredited, Iowa 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 tough thing to know. It is an appraiser's job to understand the market dynamics of their area. At Kane Appraisal & Real Estate Services, Inc., we're masters at analyzing value trends in Dubuque, Dubuque County, and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will generally eliminate 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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