Have equity in your home? Want a lower payment? An appraisal from Keim Appraisals can help you get rid of your PMI.When buying a house, a 20% down payment is typically the standard. Because the risk for the lender is often only the remainder between the home value and the sum remaining on the loan, the 20% provides a nice cushion against the charges of foreclosure, reselling the home, and typical value fluctuations on the chance that a purchaser doesn't pay.During the recent mortgage boom of the last decade, it became widespread to see lenders making deals with down payments of 10, 5, 3 or sometimes 0 percent. A lender is able to handle the additional risk of the low down payment with Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower doesn't pay on the loan and the value of the home is less than the loan balance. Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and often isn't even tax deductible, PMI can be costly to a borrower. Different from a piggyback loan where the lender consumes all the deficits, PMI is advantageous for the lender because they secure the money, and they get the money if the borrower defaults.
How can a home owner keep from bearing the cost of PMI?With the implementation of The Homeowners Protection Act of 1998, lenders are forced to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount on nearly all loans. Wise home owners can get off the hook sooner than expected. The law designates that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent.It can take several years to get to the point where the principal is just 80% of the initial amount of the loan, so it's important to know how your Illinois home has grown in value. After all, all of the appreciation you've obtained over the years counts towards dismissing 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 might have acquired equity before things simmered down. So even when nationwide trends predict falling home values, you should realize that real estate is local. A certified, Illinois licensed real estate appraiser can help homeowners figure out if their equity has made it to the 20% point, as it's a tough thing to know. It's an appraiser's job to keep up with the market dynamics of their area. At Keim Appraisals, we know when property values have risen or declined. We're experts at analyzing value trends in Waterloo, Monroe 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 homeowner 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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