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Let Powers Real Estate Services, LLC help you decide if you can cancel your PMI
When getting a mortgage, a 20% down payment is usually the standard.
Considering the risk for the lender is often only the difference between the home value and the amount outstanding on the loan, the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and typical value changes in the event a borrower is unable to pay.
During the recent mortgage upturn that our country recently experienced, it was customary to see lenders making deals with down payments of 10, 5 or sometimes 0 percent.
A lender is able to handle the added risk of the small down payment with Private Mortgage Insurance or PMI.
This added policy covers the lender in the event a borrower defaults on the loan and the value of the property is lower than the loan balance.
PMI is costly to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and often isn't even tax deductible.
Different from a piggyback loan where the lender consumes all the deficits, PMI is beneficial for the lender because they acquire the money, and they get the money if the borrower doesn't pay.
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Is PMI a lineitem in your monthly house payment? Call Powers Real Estate Services, LLC today at 402-651-2020 or send us an e-mail. Documentation of your home's current value could save you thousands.
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How home buyers can avoid bearing the cost of PMI
The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the initial loan amount.
Savvy home owners can get off the hook a little early. The law pledges that, at the request of the homeowner, the PMI must be released when the principal amount equals only 80 percent.
It can take several years to arrive at the point where the principal is just 80% of the original amount of the loan, so it's necessary to know how your Nebraska home has increased in value.
After all, every bit of appreciation you've accomplished over the years counts towards removing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold?
Even when nationwide trends signify lower overall home values, be aware that real estate is local. Your neighborhood might not be minding the national trends and/or your home may have gained equity before things declined.
The hardest thing for most people to figure out is just when their home's equity rises above the 20% point. A certified, Nebraska licensed real estate appraiser can certainly help.
Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job!
At Powers Real Estate Services, LLC, we're masters at identifying value trends in Omaha, Douglas County, and surrounding areas, and we know when property values have risen or declined.
When faced with figures from an appraiser, the mortgage company will usually drop the PMI with little trouble. At which time, the homeowner can delight in the savings from that point on.
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Is PMI something increasing your monthly mortgage payment? Call Powers Real Estate Services, LLC today at 402-651-2020 or send us an e-mail. Documentation of your home's current value could save you thousands.
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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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