Port City Appraisal Company (910) 796-0961 can help you remove your Private Mortgage InsuranceA 20% down payment is typically the standard when buying a house. Since the liability for the lender is often only the remainder between the home value and the sum outstanding on the loan, the 20% supplies a nice buffer against the expenses of foreclosure, reselling the home, and typical value changes in the event a borrower doesn't pay.
Banks were taking down payments discounted to 10, 5 and frequently 0 percent during the mortgage boom of the last decade. A lender is able to manage the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplemental plan protects the lender if a borrower is unable to pay on the loan and the market price of the property is less than what is owed on the loan.
PMI is costly to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and oftentimes isn't even tax deductible. It's profitable for the lender because they collect the money, and they get the money if the borrower is unable to pay, in contrast to a piggyback loan where the lender consumes all the losses.
How can homeowners avoid bearing the cost of PMI?The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law states that, upon request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent. So, smart homeowners can get off the hook a little early.
It can take many years to get to the point where the principal is just 80% of the initial amount of the loan, so it's necessary to know how your North Carolina home has grown in value. After all, all of the appreciation you've gained over the years counts towards abolishing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Even when nationwide trends indicate falling home values, understand that real estate is local. Your neighborhood might not be minding the national trends and/or your home could have gained equity before things declined.
The toughest thing for many consumers to figure out is just when their home's equity rises above the 20% point. A certified, North Carolina licensed real estate appraiser can definitely help. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Port City Appraisal Company (910) 796-0961, we're experts at analyzing value trends in Wilmington, New Hanover County, and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will usually do away with the PMI with little effort. At that time, the homeowner can relish the savings from that point on.
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