Carlson Agency LLC can help you remove your Private Mortgage InsuranceA 20% down payment is typically the standard when purchasing a home. The lender's risk is oftentimes only the remainder between the home value and the sum due on the loan, so the 20% adds a nice buffer against the charges of foreclosure, reselling the home, and regular value variations on the chance that a borrower doesn't pay.During the recent mortgage boom that our country recently experienced, it became common to see lenders making deals with down payments of 10, 5 or sometimes 0 percent. How does a lender manage the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI guards the lender if a borrower is unable to pay on the loan and the market price of the house is lower than what the borrower still owes on the loan. Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and oftentimes isn't even tax deductible, PMI can be expensive to a borrower. It's advantageous for the lender because they collect the money, and they get paid if the borrower defaults, separate from a piggyback loan where the lender consumes all the losses.
How can a home buyer prevent paying PMI?With the implementation of The Homeowners Protection Act of 1998, lenders are forced to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount on most loans. Acute home owners can get off the hook sooner than expected. The law stipulates that, upon request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent.Since it can take several years to get to the point where the principal is just 80% of the original amount borrowed, it's crucial to know how your Arkansas home has increased in value. After all, every bit of appreciation you've obtained over time counts towards abolishing PMI. So why pay it after your loan balance has dropped below the 80% mark? Your neighborhood may not adhere to national trends and/or your home may have acquired equity before things declined. So even when nationwide trends indicate falling home values, you should know most importantly that real estate is local. The difficult thing for almost all people to figure out is just when their home's equity goes over the 20% point. A certified, Arkansas licensed real estate appraiser can surely help. As appraisers, it's our job to keep up with the market dynamics of our area. At Carlson Agency LLC, we're experts at analyzing value trends in Yellville, Marion County, and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will usually do away with 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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