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Let Phillips Appraisal, Inc. help you learn if you can get rid of your PMI
It's typically inferred that a 20% down payment is the standard when purchasing a home.
The lender's risk is usually only the remainder between the home value and the balance due on the loan, so the 20% supplies a nice buffer against the costs of foreclosure, reselling the home, and typical value fluctuations on the chance that a borrower defaults.
During the recent mortgage boom of the last decade, it became customary to see lenders making deals with down payments of 10, 5, 3 or even 0 percent.
How does a lender handle the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI.
This added plan protects the lender in the event a borrower defaults on the loan and the market price 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 oftentimes isn't even tax deductible, PMI is pricey to a borrower.
Separate from a piggyback loan where the lender consumes all the deficits, PMI is profitable for the lender because they secure the money, and they receive payment if the borrower is unable to pay.
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The amount you keep from cancelling your PMI will make up for the cost of the appraisal in no time. Phillips Appraisal, Inc. are experts when it comes to value trends in the city of Springfield and Sangamon County. Contact us today.
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How can homebuyers keep from bearing the cost of PMI?
With the implementation of The Homeowners Protection Act of 1998, lenders are forced to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount on nearly all loans.
The law guarantees that, upon request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent. So, savvy home owners can get off the hook a little early.
It can take several years to get to the point where the principal is just 80% of the original loan amount, so it's crucial to know how your Illinois home has grown in value.
After all, any appreciation you've gained over the years counts towards removing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold?
Your neighborhood may not follow national trends and/or your home could have gained equity before things simmered down. So even when nationwide trends hint at falling home values, you should understand that real estate is local.
The toughest thing for almost all homeowners to figure out is just when their home's equity rises above the 20% point. An accredited, Illinois licensed real estate appraiser can definitely help.
It's an appraiser's job to keep up with the market dynamics of their area.
At Phillips Appraisal, Inc., we're masters at determining value trends in Springfield, Sangamon County, and surrounding areas, and we know when property values have risen or declined.
Faced with figures from an appraiser, the mortgage company will most often drop the PMI with little trouble. At which time, the home owner can delight in the savings from that point on.
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The money you keep from getting rid of your PMI pays for the appraisal in no time. Phillips Appraisal, Inc. is in the business of tracking real estate value trends in Springfield and Sangamon County. Contact us today.
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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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