Gregg Appraisal Company (605) 870-3005 can help you remove your Private Mortgage InsuranceA 20% down payment is typically the standard when purchasing a home. The lender's only exposure is usually just the difference between the home value and the balance outstanding on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, reselling the home, and regular value changes on the chance that a purchaser is unable to pay.The market was working with down payments discounted to 10, 5 and frequently 0 percent during the mortgage boom of the last decade. A lender is able to manage the additional risk of the small down payment with Private Mortgage Insurance or PMI. This added policy covers the lender if a borrower doesn't pay on the loan and the market price of the house is lower than what is owed on the loan. Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and many times isn't even tax deductible, PMI can be costly to a borrower. Unlike a piggyback loan where the lender absorbs all the costs, PMI is money-making for the lender because they obtain the money, and they get the money if the borrower defaults.
How home owners can prevent bearing the expense of PMIAs a result of The Homeowners Protection Act of 1998, lenders are required to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount on most loans. The law states that, at the request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent. So, savvy home owners can get off the hook ahead of time.It can take many years to get to the point where the principal is just 80% of the initial amount of the loan, so it's necessary to know how your South Dakota home has increased in value. After all, all of the appreciation you've accomplished over the years counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% mark? Even when nationwide trends indicate falling home values, realize that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home might have gained equity before things simmered down. A certified, South Dakota licensed real estate appraiser can help homeowners figure out if their equity has made it to the 20% point, as it's a hard thing to know. As appraisers, it's our job to understand the market dynamics of our area. At Gregg Appraisal Company (605) 870-3005, we're experts at determining value trends in Jefferson, Union County, and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will usually drop 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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