Shafer Appraisal can help you remove your Private Mortgage InsuranceA 20% down payment is usually the standard when buying a house. The lender's risk is usually only the remainder between the home value and the amount due on the loan, so the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and typical value fluctuations on the chance that a borrower is unable to pay.The market was accepting down payments dropping to 10, 5 and even 0 percent during the mortgage boom of the last decade. A lender is able to handle the additional risk of the small down payment with Private Mortgage Insurance or PMI. PMI protects the lender in the event a borrower doesn't pay on the loan and the market price of the property is lower than what the borrower still owes on the loan. PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and oftentimes isn't even tax deductible. It's money-making for the lender because they acquire the money, and they are covered if the borrower defaults, in contrast to a piggyback loan where the lender consumes all the costs.
How can homebuyers avoid paying PMI?With the passage of The Homeowners Protection Act of 1998, lenders are required to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount on nearly all loans. The law guarantees that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent. So, keen home owners can get off the hook sooner than expected.It can take a significant number of years to arrive at the point where the principal is only 80% of the initial amount borrowed, so it's crucial to know how your Oklahoma home has increased in value. After all, any appreciation you've gained over time counts towards removing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Even when nationwide trends predict declining home values, understand that real estate is local. Your neighborhood may not be heeding the national trends and/or your home may have secured equity before things declined. The hardest thing for almost all homeowners to determine is whether their home equity has exceeded the 20% point. An accredited, Oklahoma licensed real estate appraiser can surely help. As appraisers, it's our job to recognize the market dynamics of our area. At Shafer Appraisal, we know when property values have risen or declined. We're experts at recognizing value trends in Oklahoma City, Oklahoma County, and surrounding areas. When faced with figures from an appraiser, the mortgage company will generally eliminate 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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