Albers & Co LLC can help you remove your Private Mortgage InsuranceWhen buying a house, a 20% down payment is usually the standard. The lender's risk is generally only the difference between the home value and the sum remaining on the loan, so the 20% provides a nice cushion against the expenses of foreclosure, reselling the home, and regular value changes in the event a purchaser doesn't pay.During the recent mortgage upturn of the last decade, it was customary to see lenders only asking for down payments of 10, 5, 3 or often 0 percent. A lender is able to manage the increased risk of the low down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower is unable to pay on the loan and the value of the home is lower than what is owed on the loan. PMI can be expensive to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and oftentimes isn't even tax deductible. It's beneficial for the lender because they secure the money, and they receive payment if the borrower is unable to pay, in contrast to a piggyback loan where the lender consumes all the losses.
How can a buyer prevent bearing the cost of PMI?As a result of The Homeowners Protection Act of 1998, lenders are required to automatically cease the PMI when the principal balance of the loan equals 78 percent of the primary loan amount on nearly all loans. The law guarantees that, upon request of the home owner, the PMI must be released when the principal amount reaches only 80 percent. So, smart home owners can get off the hook sooner than expected.Considering it can take a significant number of years to get to the point where the principal is just 80% of the original amount borrowed, it's necessary to know how your Missouri home has grown in value. After all, every bit of appreciation you've acquired over time counts towards removing PMI. So why pay it after your loan balance has dropped below the 80% mark? Even when nationwide trends hint at declining home values, understand that real estate is local. Your neighborhood may not be minding the national trends and/or your home may have acquired equity before things declined. The toughest thing for almost all homeowners to determine is whether their home equity has exceeded the 20% point. An accredited, Missouri licensed real estate appraiser can certainly help. It's an appraiser's job to know the market dynamics of their area. At Albers & Co LLC, we know when property values have risen or declined. We're masters at analyzing value trends in Lake Ozark, Camden County, and surrounding areas. When faced with information from an appraiser, the mortgage company will most often cancel the PMI with little effort. 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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