Have equity in your home? Want a lower payment? An appraisal from Tennessee Home Appraisals can help you get rid of your PMI.When buying a house, a 20% down payment is typically the standard. The lender's only risk is typically just the difference between the home value and the sum remaining on the loan, so the 20% provides a nice buffer against the expenses of foreclosure, selling the home again, and typical value changes in the event a borrower doesn't pay.During the recent mortgage boom that our country recently experienced, it was common to see lenders making deals with down payments of 10, 5, 3 or often 0 percent. A lender is able to manage the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower doesn't pay on the loan and the market price of the house is less than the loan balance. PMI can be expensive to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and on many occasions isn't even tax deductible. It's lucrative for the lender because they acquire the money, and they get paid if the borrower doesn't pay, separate from a piggyback loan where the lender absorbs all the costs.
How can home owners avoid bearing the cost of PMI?With the implementation of The Homeowners Protection Act of 1998, lenders are obligated to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the original loan amount on nearly all loans. The law promises that, upon request of the homeowner, the PMI must be released when the principal amount equals only 80 percent. So, keen home owners can get off the hook sooner than expected.It can take several years to arrive at the point where the principal is just 80% of the original amount of the loan, so it's essential to know how your Tennessee home has appreciated in value. After all, any appreciation you've achieved over time counts towards removing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold? Even when nationwide trends hint at lower overall home values, realize that real estate is local. Your neighborhood may not be following the national trends and/or your home might have gained equity before things simmered down. A certified, Tennessee licensed real estate appraiser can help home owners figure out just when their home's equity rises above the 20% point, as it's a difficult thing to know. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Tennessee Home Appraisals, we know when property values have risen or declined. We're masters at analyzing value trends in Kingsport, Sullivan County, and surrounding areas. Faced with figures from an appraiser, the mortgage company will generally remove 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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