Let QC Home Appraisal help you figure out if you can get rid of your PMIWhen buying a house, a 20% down payment is usually the standard. Considering the liability for the lender is usually only the remainder between the home value and the amount outstanding on the loan, the 20% provides a nice cushion against the expenses of foreclosure, reselling the home, and regular value changes in the event a purchaser defaults.
Banks were taking down payments as low as 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. A lender is able to manage the added risk of the low down payment with Private Mortgage Insurance or PMI. This supplemental plan takes care of the lender in the event a borrower defaults on the loan and the market price of the house is less than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and often isn't even tax deductible, PMI is pricey to a borrower. It's beneficial for the lender because they obtain the money, and they receive payment if the borrower doesn't pay, different from a piggyback loan where the lender consumes all the costs.
How home owners can prevent bearing the cost of PMIWith the passage of The Homeowners Protection Act of 1998, lenders are obligated to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount on most loans. Smart homeowners can get off the hook sooner than expected. The law pledges that, at the request of the homeowner, the PMI must be released when the principal amount equals just 80 percent.
It can take a significant number of years to arrive at the point where the principal is just 80% of the initial loan amount, so it's important to know how your Illinois home has appreciated in value. After all, all of the appreciation you've accomplished over the years counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% threshold? Even when nationwide trends indicate lower overall home values, be aware that real estate is local. Your neighborhood might not be minding the national trends and/or your home may have gained equity before things cooled off.
The toughest thing for almost all homeowners to figure out is just when their home's equity rises above the 20% point. A certified, Illinois licensed real estate appraiser can definitely help. It's an appraiser's job to keep up with the market dynamics of their area. At QC Home Appraisal, we're masters at analyzing value trends in Moline, Henry 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 generally remove the PMI with little effort. At that time, the homeowner can enjoy the savings from that point on.
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