Conser Appraisals, Inc. can help you remove your Private Mortgage InsuranceWhen purchasing a home, a 20% down payment is usually the standard. The lender's only exposure is typically just the difference between the home value and the balance remaining on the loan, so the 20% adds a nice cushion against the charges of foreclosure, selling the home again, and typical value changes on the chance that a borrower defaults.
The market was taking down payments discounted to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender handle the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower defaults on the loan and the value of the house is less than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and on many occasions isn't even tax deductible, PMI can be costly to a borrower. It's lucrative for the lender because they acquire the money, and they get the money if the borrower defaults, different from a piggyback loan where the lender takes in all the losses.
How can a buyer prevent bearing the expense of PMI?The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law promises that, at the request of the home owner, the PMI must be released when the principal amount equals only 80 percent. So, savvy home owners can get off the hook a little early.
Considering it can take many years to arrive at the point where the principal is only 80% of the initial loan amount, it's necessary to know how your Oregon home has appreciated in value. After all, every bit of appreciation you've obtained 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 may not follow national trends and/or your home could have gained equity before things cooled off. So even when nationwide trends forecast falling home values, you should understand that real estate is local.
The toughest thing for most homeowners to figure out is whether their home equity has exceeded the 20% point. An accredited, Oregon licensed real estate appraiser can surely help. It is an appraiser's job to understand the market dynamics of their area. At Conser Appraisals, Inc., we know when property values have risen or declined. We're masters at recognizing value trends in Salem, Marion County, and surrounding areas. Faced with data from an appraiser, the mortgage company will usually cancel the PMI with little anxiety. At which time, the home owner can delight in the savings from that point on.
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