Have equity in your home? Want a lower payment? An appraisal from McLeod Appraisal Group can help you get rid of your PMI.It's widely inferred that a 20% down payment is accepted when purchasing a home. Considering the liability for the lender is often only the difference between the home value and the amount outstanding on the loan, the 20% provides a nice buffer against the expenses of foreclosure, selling the home again, and regular value fluctuations in the event a purchaser defaults.During the recent mortgage boom that our country recently experienced, it was customary to see lenders making deals with down payments of 10, 5, 3 or even 0 percent. How does a lender manage the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower doesn't pay on the loan and the market price of the home is less than what the borrower still owes on the loan. Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and oftentimes isn't even tax deductible, PMI can be pricey to a borrower. It's profitable for the lender because they acquire the money, and they are covered if the borrower defaults, as opposed to a piggyback loan where the lender consumes all the costs.
How can homeowners avoid paying PMI?As a result of The Homeowners Protection Act of 1998, lenders are obligated to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount on nearly all loans. Wise home owners can get off the hook sooner than expected. The law guarantees that, at the request of the homeowner, the PMI must be released when the principal amount equals only 80 percent.It can take many years to arrive at the point where the principal is just 80% of the initial amount of the loan, so it's necessary to know how your North Carolina home has grown in value. After all, any appreciation you've achieved over the years counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% threshold? Your neighborhood may not adhere to national trends and/or your home could have acquired equity before things cooled off. So even when nationwide trends indicate falling home values, you should understand that real estate is local. A certified, North Carolina licensed real estate appraiser can help home owners figure out if their equity has made it to the 20% point, as it's a difficult thing to know. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At McLeod Appraisal Group, we know when property values have risen or declined. We're masters at analyzing value trends in Hope Mills, Cumberland County, and surrounding areas. When faced with information from an appraiser, the mortgage company will generally eliminate the PMI with little anxiety. At which 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: Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year
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