Have equity in your home? Want a lower payment?
An appraisal from JM Real Estate Service can help you get rid of your PMI.When purchasing a home, a 20% down payment is typically the standard. The lender's only liability is generally just the difference between the home value and the amount outstanding on the loan, so the 20% supplies a nice buffer against the costs of foreclosure, selling the home again, and natural value changes in the event a borrower is unable to pay.
During the recent mortgage upturn of the last decade, it became widespread to see lenders only asking for down payments of 10, 5, 3 or even 0 percent. A lender is able to manage the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI protects 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 bundled into the mortgage payment and often isn't even tax deductible, PMI can be expensive to a borrower. It's money-making for the lender because they secure the money, and they get the money if the borrower defaults, in contrast to a piggyback loan where the lender consumes all the costs.
How homeowners can keep from bearing the expense of PMIAs a result of The Homeowners Protection Act of 1998, lenders are obligated to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount on most loans. The law pledges that, upon request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent. So, acute homeowners can get off the hook ahead of time.
It can take a significant number of years to reach the point where the principal is just 80% of the original loan amount, so it's essential to know how your Illinois home has increased in value. After all, any appreciation you've accomplished over the years counts towards removing PMI. So why pay 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 the economy declined. So even when nationwide trends signify falling home values, you should understand that real estate is local.
An accredited, Illinois licensed real estate appraiser can help homeowners figure out just when their home's equity goes over the 20% point, as it's a tough thing to know. It's an appraiser's job to know the market dynamics of their area. At JM Real Estate Service, we know when property values have risen or declined. We're experts at recognizing value trends in Palatine, Cook County, and surrounding areas. Faced with figures from an appraiser, the mortgage company will generally eliminate the PMI with little trouble. At which time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: