Elite Appraisal Center, LLC can help you remove your Private Mortgage InsuranceWhen buying a house, a 20% down payment is usually the standard. The lender's liability is usually only the remainder between the home value and the sum remaining on the loan, so the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and natural value variations on the chance that a purchaser doesn't pay.
Lenders were accepting down payments dropping to 10, 5 and frequently 0 percent during the mortgage boom of the last decade. How does a lender manage the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This supplementary plan takes care of the lender if a borrower is unable to pay on the loan and the value of the house is less than what is owed on the loan.
PMI is pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and on many occasions isn't even tax deductible. It's advantageous for the lender because they collect the money, and they get paid if the borrower defaults, as opposed to a piggyback loan where the lender takes in all the damages.
How buyers can keep from paying PMIAs a result of The Homeowners Protection Act of 1998, lenders are required to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount on nearly all loans. Smart home owners can get off the hook beforehand. The law states that, upon request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent.
It can take a significant number of years to get to the point where the principal is only 80% of the original amount of the loan, so it's necessary to know how your Illinois home has increased in value. After all, every bit of appreciation you've achieved over the years counts towards removing PMI. So what's the reason for paying 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 declined. So even when nationwide trends hint at declining home values, you should understand that real estate is local.
An accredited, Illinois licensed real estate appraiser can help homeowners figure out if their equity has exceeed the 20% point, as it's a hard thing to know. It's an appraiser's job to understand the market dynamics of their area. At Elite Appraisal Center, LLC, we're experts at pinpointing value trends in Park Ridge, Cook County, and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will often remove the PMI with little effort. At that time, the home owner can relish 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