Have equity in your home? Want a lower payment? An appraisal from Tomich & Associates, LLC can help you get rid of your PMI.A 20% down payment is typically accepted when getting a mortgage. The lender's only exposure is often just the remainder between the home value and the amount due on the loan, so the 20% adds a nice cushion against the costs of foreclosure, reselling the home, and natural value changes on the chance that a borrower doesn't pay.Lenders were taking down payments dropping to 10, 5 and frequently 0 percent during the mortgage boom of the mid 2000s. How does a lender manage the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower defaults on the loan and the value of the home is less than the loan balance. Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI can be expensive to a borrower. As opposed to a piggyback loan where the lender absorbs all the losses, PMI is lucrative for the lender because they acquire the money, and they receive payment if the borrower doesn't pay.
How home owners can refrain from bearing the expense of PMIThe Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Smart homeowners can get off the hook ahead of time. The law states that, at the request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent.It can take a significant number of years to reach the point where the principal is just 80% of the initial amount of the loan, so it's important to know how your Michigan home has increased in value. After all, all of the appreciation you've acquired over the years counts towards abolishing PMI. So why pay it after your loan balance has dropped below the 80% mark? Even when nationwide trends signify falling home values, be aware that real estate is local. Your neighborhood may not be minding the national trends and/or your home could have gained equity before things simmered down. An accredited, Michigan licensed real estate appraiser can help homeowners figure out just when their home's equity goes over the 20% point, as it's a hard thing to know. As appraisers, it's our job to know the market dynamics of our area. At Tomich & Associates, LLC, we know when property values have risen or declined. We're experts at identifying value trends in Belding, Kent County, and surrounding areas. When faced with figures from an appraiser, the mortgage company will generally drop the PMI with little effort. At which time, the homeowner can retain 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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