Let Bloom Appraisers, Inc. help you figure out if you can get rid of your PMIA 20% down payment is typically the standard when buying a house. Since the risk for the lender is oftentimes only the remainder between the home value and the sum due on the loan, the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and regular value variations in the event a borrower doesn't pay.
During the recent mortgage upturn that our country recently experienced, it became widespread to see lenders only asking for down payments of 10, 5, 3 or sometimes 0 percent. How does a lender handle the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This added policy guards the lender if a borrower doesn't pay on the loan and the value of the property is less than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and frequently isn't even tax deductible, PMI is costly to a borrower. It's favorable for the lender because they acquire the money, and they receive payment if the borrower doesn't pay, unlike a piggyback loan where the lender consumes all the damages.
How home owners can prevent bearing the cost of PMIWith the passage of The Homeowners Protection Act of 1998, lenders are required to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount on nearly all loans. Savvy home owners can get off the hook a little early. The law stipulates that, upon request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent.
It can take a significant number of years to arrive at the point where the principal is only 80% of the original amount of the loan, so it's important to know how your Hawaii home has appreciated in value. After all, any appreciation you've gained over the years counts towards abolishing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Your neighborhood might not follow national trends and/or your home may have acquired equity before things cooled off. So even when nationwide trends hint at a reduction in home values, you should understand that real estate is local.
A certified, Hawaii licensed real estate appraiser can help home owners figure out if their equity has made it to 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 Bloom Appraisers, Inc., we know when property values have risen or declined. We're masters at determining value trends in Hilo, Hawaii County, and surrounding areas. When faced with figures from an appraiser, the mortgage company will usually remove the PMI with little trouble. At which time, the home owner can retain the savings from that point on.
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