Crescent Appraisal Group, Inc. can help you remove your Private Mortgage InsuranceA 20% down payment is typically accepted when purchasing a home. Because the liability for the lender is oftentimes only the difference between the home value and the sum remaining on the loan, the 20% adds a nice cushion against the expenses of foreclosure, selling the home again, and regular value fluctuations on the chance that a borrower doesn't pay.
The market was accepting down payments as low as 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender handle the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This supplementary policy covers the lender if a borrower is unable to pay on the loan and the value of the home is lower than what the borrower still owes on the loan.
PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and often isn't even tax deductible. It's favorable for the lender because they collect the money, and they get paid if the borrower defaults, different from a piggyback loan where the lender consumes all the costs.
How can homeowners keep from bearing the expense of PMI?With the passage of The Homeowners Protection Act of 1998, lenders are obligated to automatically cease the PMI when the principal balance of the loan equals 78 percent of the primary loan amount on nearly all loans. The law states that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, savvy homeowners can get off the hook a little earlier.
It can take a significant number of years to get to the point where the principal is just 80% of the initial loan amount, so it's necessary to know how your Louisiana home has increased in value. After all, every bit of appreciation you've obtained over time counts towards removing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold? Even when nationwide trends signify falling home values, be aware that real estate is local. Your neighborhood may not be heeding the national trends and/or your home may have secured equity before things cooled off.
An accredited, Louisiana licensed real estate appraiser can help home owners figure out just when their home's equity goes over the 20% point, as it's a difficult thing to know. It's an appraiser's job to understand the market dynamics of their area. At Crescent Appraisal Group, Inc., we know when property values have risen or declined. We're masters at determining value trends in Metairie, Jefferson County, and surrounding areas. When faced with figures from an appraiser, the mortgage company will often eliminate the PMI with little trouble. At that time, the home owner can enjoy the savings from that point on.
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