Have equity in your home? Want a lower payment? An appraisal from ZREC, LLC can help you get rid of your PMI.When getting a mortgage, a 20% down payment is usually the standard. The lender's risk is usually only the remainder between the home value and the amount due on the loan, so the 20% provides a nice cushion against the expenses of foreclosure, reselling the home, and natural value fluctuations in the event a purchaser doesn't pay.During the recent mortgage boom that our country recently experienced, it was common to see lenders reducing down payments to 10, 5, 3 or sometimes 0 percent. How does a lender manage the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender if a borrower doesn't pay on the loan and the value of the home is less than the balance of the loan. PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and often isn't even tax deductible. It's beneficial for the lender because they collect the money, and they receive payment if the borrower defaults, in contrast to a piggyback loan where the lender absorbs all the costs.
How can a buyer prevent bearing the cost of PMI?The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law promises that, upon request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent. So, keen homeowners can get off the hook a little earlier.It can take a significant number of years to reach the point where the principal is only 80% of the initial amount of the loan, so it's crucial to know how your North Carolina home has increased in value. After all, all of the appreciation you've achieved over the years counts towards removing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Your neighborhood may not conform to national trends and/or your home may have gained equity before things cooled off. So even when nationwide trends forecast falling home values, you should know most importantly that real estate is local. The difficult thing for almost all homeowners to figure out is whether their home equity has exceeded the 20% point. A certified, North Carolina licensed real estate appraiser can surely help. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At ZREC, LLC, we're experts at identifying value trends in Huntersville, Mecklenburg County, and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will usually drop the PMI with little trouble. At which time, the homeowner can retain 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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