Let Spyglass Valuation Services (541) 347-1150 help you decide if you can eliminate your PMIWhen purchasing a home, a 20% down payment is usually the standard. The lender's liability is usually only the remainder between the home value and the sum due on the loan, so the 20% adds a nice cushion against the expenses of foreclosure, selling the home again, and natural value variations in the event a borrower doesn't pay.During the recent mortgage upturn of the mid 2000s, it was customary to see lenders reducing down payments to 10, 5 or often 0 percent. A lender is able to manage the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. This additional policy takes care of the lender in the event a borrower defaults on the loan and the value of the property is less than what is owed on the loan. PMI is costly to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and many times isn't even tax deductible. Unlike a piggyback loan where the lender consumes all the losses, PMI is advantageous for the lender because they secure the money, and they receive payment if the borrower defaults.
How can a homeowner avoid bearing the expense of PMI?As a result of The Homeowners Protection Act of 1998, lenders are required to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the original loan amount on nearly all loans. Keen home owners can get off the hook ahead of time. The law states that, upon request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent.Considering it can take a significant number of years to reach the point where the principal is only 80% of the original loan amount, it's important to know how your Oregon home has grown in value. After all, all of the appreciation you've obtained 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 hint at declining home values, realize that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home may have acquired equity before things declined. An accredited, Oregon 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 recognize the market dynamics of their area. At Spyglass Valuation Services (541) 347-1150, we know when property values have risen or declined. We're experts at recognizing value trends in Bandon, Coos County, and surrounding areas. When faced with figures from an appraiser, the mortgage company will often do away with the PMI with little anxiety. At that time, the home owner can delight in 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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