Have equity in your home? Want a lower payment? An appraisal from CRS Appraisals can help you get rid of your PMI.A 20% down payment is usually the standard when getting a mortgage. Considering the risk for the lender is oftentimes only the difference between the home value and the sum outstanding on the loan, the 20% supplies a nice cushion against the costs of foreclosure, reselling the home, and regular value changes in the event a purchaser is unable to pay.Banks were taking down payments dropping to 10, 5 and even 0 percent during the mortgage boom of the last decade. How does a lender manage the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This additional policy takes care of the lender in case a borrower defaults on the loan and the value of the house is less than the loan balance. Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible, PMI can be pricey to a borrower. It's favorable for the lender because they acquire the money, and they get paid if the borrower defaults, separate from a piggyback loan where the lender consumes all the losses.
How home owners can avoid bearing the expense of PMIWith the implementation of The Homeowners Protection Act of 1998, lenders are required to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount on nearly all loans. Savvy home owners can get off the hook sooner than expected. The law guarantees that, at the request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent.It can take a significant number of years to get to the point where the principal is just 80% of the original loan amount, so it's essential to know how your South Carolina home has increased in value. After all, all of the appreciation you've achieved over time counts towards dismissing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Even when nationwide trends predict falling home values, understand that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home may have secured equity before things cooled off. The hardest thing for almost all consumers to determine is whether their home equity has exceeded the 20% point. A certified, South Carolina licensed real estate appraiser can certainly help. It is an appraiser's job to know the market dynamics of their area. At CRS Appraisals, we're masters at pinpointing value trends in Charleston, Charleston County, and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will generally drop the PMI with little trouble. At which 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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