Driskell & Associates, LLC can help you remove your Private Mortgage InsuranceIt's widely understood that a 20% down payment is accepted when purchasing a home. The lender's liability is oftentimes only the remainder between the home value and the amount due on the loan, so the 20% supplies a nice cushion against the expenses of foreclosure, reselling the home, and typical value variations on the chance that a borrower defaults.Banks were working with down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender endure the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI guards the lender if a borrower defaults on the loan and the market price of the house is less than what is owed on the loan. PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and many times isn't even tax deductible. It's beneficial for the lender because they acquire the money, and they receive payment if the borrower defaults, as opposed to a piggyback loan where the lender takes in all the costs.
How can homebuyers refrain from bearing the cost of PMI?With the implementation of The Homeowners Protection Act of 1998, lenders are forced to automatically stop the PMI when the principal balance of the loan equals 78 percent of the primary loan amount on most loans. Savvy home owners can get off the hook a little early. The law states that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent.Considering it can take a significant number of years to reach the point where the principal is just 80% of the original loan amount, it's important to know how your Missouri home has grown in value. After all, every bit of appreciation you've acquired over the years counts towards removing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends signify lower overall home values, understand that real estate is local. Your neighborhood may not be adopting the national trends and/or your home might have gained equity before things cooled off. The toughest thing for many home owners to know is just when their home's equity rises above if their home equity has exceeded the 20% point. A certified, Missouri licensed real estate appraiser can definitely help. It is an appraiser's job to understand the market dynamics of their area. At Driskell & Associates, LLC, we know when property values have risen or declined. We're masters at recognizing value trends in Blue Springs, Jackson County, and surrounding areas. When faced with data from an appraiser, the mortgage company will most often eliminate the PMI with little effort. At which time, the home owner 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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