Let Bob Hayes Real Estate Appraiser help you figure out if you can get rid of your PMIIt's generally inferred that a 20% down payment is accepted when purchasing a home. Since the liability for the lender is generally only the remainder between the home value and the sum remaining on the loan, the 20% adds a nice buffer against the costs of foreclosure, reselling the home, and regular value variations in the event a purchaser doesn't pay.
During the recent mortgage upturn of the mid 2000s, it became common to see lenders only asking for down payments of 10, 5, 3 or sometimes 0 percent. A lender is able to manage the additional risk of the small down payment with Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower is unable to pay on the loan and the market price of the home is lower than the loan balance.
PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and oftentimes isn't even tax deductible. Unlike a piggyback loan where the lender consumes all the losses, PMI is beneficial for the lender because they secure the money, and they are covered if the borrower doesn't pay.
How homeowners can keep from paying PMIAs a result of The Homeowners Protection Act of 1998, lenders are forced to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount on nearly all loans. The law stipulates that, upon request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent. So, wise home owners can get off the hook a little earlier.
Considering it can take many years to arrive at the point where the principal is just 80% of the initial amount of the loan, it's essential to know how your Alaska home has grown in value. After all, every bit of appreciation you've gained over time counts towards dismissing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends forecast decreasing home values, realize that real estate is local. Your neighborhood might not be heeding the national trends and/or your home might have gained equity before things cooled off.
A certified, Alaska licensed real estate appraiser can help homeowners figure out just when their home's equity rises above the 20% point, as it's a difficult thing to know. It is an appraiser's job to understand the market dynamics of their area. At Bob Hayes Real Estate Appraiser, we're experts at determining value trends in Anchorage, Anchorage County, and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will generally remove the PMI with little anxiety. At which time, the homeowner can relish the savings from that point on.
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