Have equity in your home? Want a lower payment? An appraisal from CAA Real Property Services, Inc. can help you get rid of your PMI.It's generally inferred that a 20% down payment is accepted when buying a house. The lender's only exposure is typically just the remainder between the home value and the amount remaining on the loan, so the 20% provides a nice cushion against the expenses of foreclosure, reselling the home, and typical value fluctuations on the chance that a purchaser is unable to pay.
During the recent mortgage upturn of the mid 2000s, it became widespread to see lenders making deals with down payments of 10, 5 or sometimes 0 percent. A lender is able to endure the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI protects the lender if a borrower defaults on the loan and the value of the home is less than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and frequently isn't even tax deductible, PMI can be expensive to a borrower. Instead of a piggyback loan where the lender consumes all the costs, PMI is profitable for the lender because they acquire the money, and they get paid if the borrower defaults.
How can homebuyers prevent bearing the cost of PMI?The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Smart home owners can get off the hook sooner than expected. The law designates that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent.
Considering it can take several years to get to the point where the principal is only 80% of the initial amount borrowed, it's important to know how your South Carolina home has appreciated in value. After all, all of the appreciation you've acquired over the years counts towards dismissing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Even when nationwide trends indicate declining home values, be aware that real estate is local. Your neighborhood might not be adopting the national trends and/or your home may have gained equity before things declined.
The hardest thing for almost all homeowners to determine is whether their home equity has exceeded the 20% point. A certified, South Carolina licensed real estate appraiser can surely help. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At CAA Real Property Services, Inc., we know when property values have risen or declined. We're experts at recognizing value trends in Greenville, County, and surrounding areas. Faced with figures from an appraiser, the mortgage company will most often eliminate the PMI with little effort. At that time, the homeowner can relish the savings from that point on.
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