Have equity in your home? Want a lower payment? An appraisal from Pinnacle Appraisals can help you get rid of your PMI.When getting a mortgage, a 20% down payment is typically the standard. The lender's only exposure is often just the remainder between the home value and the sum outstanding on the loan, so the 20% supplies a nice cushion against the expenses of foreclosure, selling the home again, and natural value fluctuations on the chance that a purchaser doesn't pay.
During the recent mortgage upturn of the mid 2000s, it was widespread to see lenders reducing down payments to 10, 5 or even 0 percent. A lender is able to manage the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower defaults on the loan and the market price of the home is lower than what the borrower still owes on the loan.
PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible. It's beneficial for the lender because they secure the money, and they receive payment if the borrower doesn't pay, in contrast to a piggyback loan where the lender takes in all the costs.
How can a home buyer prevent bearing the cost of PMI?With the implementation 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 beginning loan amount on most loans. The law states that, at the request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent. So, keen homeowners can get off the hook a little early.
Considering it can take many years to get to the point where the principal is only 80% of the initial amount borrowed, it's essential to know how your Tennessee home has appreciated in value. After all, all of the appreciation you've acquired over the years counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% mark? Even when nationwide trends forecast declining home values, be aware that real estate is local. Your neighborhood may not be minding the national trends and/or your home may have secured equity before things declined.
The hardest thing for most consumers to determine is whether their home equity has exceeded the 20% point. An accredited, Tennessee licensed real estate appraiser can certainly help. It's an appraiser's job to know the market dynamics of their area. At Pinnacle Appraisals, we know when property values have risen or declined. We're experts at recognizing value trends in Knoxville, Knox County, and surrounding areas. Faced with information from an appraiser, the mortgage company will most often eliminate the PMI with little trouble. At that time, the home owner can delight in the savings from that point on.
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