Let Harmon Management Group help you figure out if you can get rid of your PMIA 20% down payment is typically the standard when purchasing a home. Since 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 charges of foreclosure, reselling the home, and typical value fluctuations on the chance that a purchaser is unable to pay.
The market was working with down payments as low as 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. A lender is able to handle the increased risk of the low down payment with Private Mortgage Insurance or PMI. This supplemental plan guards the lender if a borrower doesn't pay on the loan and the value of the home is less 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 many times isn't even tax deductible. It's money-making for the lender because they secure the money, and they get the money if the borrower defaults, unlike a piggyback loan where the lender takes in all the damages.
How can homebuyers keep from bearing the expense of PMI?The Homeowners Protection Act of 1998 requires the lenders on the majority of loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law promises that, upon request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent. So, wise homeowners can get off the hook sooner than expected.
Since it can take many years to get to the point where the principal is only 80% of the initial loan amount, it's necessary to know how your Delaware home has appreciated in value. After all, any appreciation you've acquired 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? Even when nationwide trends hint at decreasing home values, understand that real estate is local. Your neighborhood might not be heeding the national trends and/or your home might have acquired equity before things declined.
A certified, Delaware licensed real estate appraiser can help home owners figure out if their equity has exceeed the 20% point, as it's a difficult thing to know. It's an appraiser's job to recognize the market dynamics of their area. At Harmon Management Group, we know when property values have risen or declined. We're experts at pinpointing value trends in Wilmington, New Castle County, and surrounding areas. When faced with data from an appraiser, the mortgage company will usually drop the PMI with little effort. At that time, the home owner can delight in 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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