Let Sea Island Appraisal Company help you discover if you can eliminate your PMIIt's typically known that a 20% down payment is accepted when purchasing a home. The lender's only exposure is typically just the difference between the home value and the amount due on the loan, so the 20% provides a nice buffer against the expenses of foreclosure, reselling the home, and regular value fluctuations on the chance that a purchaser defaults.Lenders were accepting down payments discounted to 10, 5 and frequently 0 percent in the peak of last decade's mortgage boom. How does a lender handle the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This supplemental plan protects the lender in case a borrower is unable to pay on the loan and the value of the home is less than what the borrower still owes on the loan. Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and often isn't even tax deductible, PMI can be pricey to a borrower. Instead of a piggyback loan where the lender absorbs all the losses, PMI is beneficial for the lender because they secure the money, and they receive payment if the borrower doesn't pay.
How can a buyer keep from bearing the expense of PMI?The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Keen homeowners can get off the hook ahead of time. The law pledges that, upon request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent.It can take several years to get to the point where the principal is only 80% of the original loan amount, so it's important to know how your South Carolina home has grown in value. After all, every bit of appreciation you've achieved over time counts towards abolishing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Even when nationwide trends signify falling home values, understand that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home might have gained equity before things declined. A certified, South Carolina licensed real estate appraiser can help home owners figure out if their equity has reached the 20% point, as it's a difficult thing to know. It's an appraiser's job to keep up with the market dynamics of their area. At Sea Island Appraisal Company, we're masters at analyzing value trends in Beaufort, Beaufort 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 generally drop the PMI with little anxiety. At that time, the home owner 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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