Have equity in your home? Want a lower payment? An appraisal from Boss Appraisal, Inc. can help you get rid of your PMI.When buying a house, a 20% down payment is typically the standard. The lender's risk is usually only the difference between the home value and the balance outstanding on the loan, so the 20% provides a nice cushion against the costs of foreclosure, reselling the home, and regular value variations on the chance that a purchaser is unable to pay.Banks were working with down payments as low as 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. A lender is able to manage the additional risk of the low down payment with Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower defaults on the loan and the value of the property is lower than the balance of the loan. PMI is costly to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and on many occasions isn't even tax deductible. It's profitable for the lender because they collect the money, and they get paid if the borrower doesn't pay, different from a piggyback loan where the lender takes in all the damages.
How homebuyers can avoid paying PMIThe Homeowners Protection Act of 1998 requires the lenders on the majority of loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law promises that, at the request of the home owner, the PMI must be released when the principal amount reaches just 80 percent. So, wise homeowners can get off the hook ahead of time.It can take many years to reach the point where the principal is only 80% of the original amount of the loan, so it's important to know how your Illinois home has increased in value. After all, all of the appreciation you've gained over time counts towards abolishing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood might not conform to national trends and/or your home may have secured equity before the economy simmered down. So even when nationwide trends signify a reduction in home values, you should understand that real estate is local. An accredited, Illinois licensed real estate appraiser can help home owners figure out if their equity has exceeed the 20% point, as it's a hard thing to know. It's an appraiser's job to know the market dynamics of their area. At Boss Appraisal, Inc., we know when property values have risen or declined. We're experts at analyzing value trends in Sandwich, Dekalb County, and surrounding areas. Faced with information from an appraiser, the mortgage company will usually do away with the PMI with little effort. At that time, the home owner can enjoy 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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