Have equity in your home? Want a lower payment? An appraisal from Northpointe Appraisals can help you get rid of your PMI.A 20% down payment is typically the standard when purchasing a home. The lender's liability is usually only the difference between the home value and the balance due on the loan, so the 20% adds a nice cushion against the charges of foreclosure, selling the home again, and regular value fluctuations in the event a borrower is unable to pay.Lenders were taking down payments discounted to 10, 5 and frequently 0 percent during the mortgage boom of the mid 2000s. How does a lender endure the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower is unable to pay on the loan and the market price of the house is less 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 payment and frequently isn't even tax deductible. Instead of a piggyback loan where the lender takes in all the losses, PMI is lucrative for the lender because they secure the money, and they receive payment if the borrower doesn't pay.
How can a home buyer refrain from paying PMI?The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Wise home owners can get off the hook sooner than expected. The law designates that, at the request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent.Considering it can take a significant number of years to get to the point where the principal is only 80% of the initial amount of the loan, it's crucial to know how your North Dakota home has appreciated in value. After all, every bit of appreciation you've acquired over the years counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% mark? Even when nationwide trends indicate lower overall home values, be aware that real estate is local. Your neighborhood might not be adopting the national trends and/or your home may have acquired equity before things simmered down. An accredited, North Dakota licensed real estate appraiser can help home owners figure out if their equity has exceeed the 20% point, as it's a tough thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At Northpointe Appraisals, we know when property values have risen or declined. We're experts at identifying value trends in FARGO, Cass County, and surrounding areas. Faced with data from an appraiser, the mortgage company will often cancel the PMI with little effort. At that time, the home owner 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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