DuBose Appraisal Service can help you remove your Private Mortgage InsuranceA 20% down payment is usually the standard when buying a house. Because the liability for the lender is often only the remainder between the home value and the sum due on the loan, the 20% adds a nice buffer against the costs of foreclosure, reselling the home, and regular value changes on the chance that a borrower doesn't pay.During the recent mortgage upturn of the last decade, it became common to see lenders only asking for down payments of 10, 5, 3 or often 0 percent. A lender is able to endure the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplemental policy protects the lender in case 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 rolled into the mortgage payment and often isn't even tax deductible, PMI can be costly to a borrower. Unlike a piggyback loan where the lender absorbs all the losses, PMI is favorable for the lender because they acquire the money, and they are covered if the borrower is unable to pay.
How can homeowners avoid paying PMI?The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Savvy homeowners can get off the hook sooner than expected. The law pledges that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent.It can take many years to arrive at the point where the principal is just 80% of the original loan amount, so it's essential to know how your Oregon home has grown in value. After all, every bit of appreciation you've achieved over the years counts towards removing PMI. So why pay 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 cooled off. So even when nationwide trends hint at a reduction in home values, you should know most importantly that real estate is local. The difficult thing for most homeowners to figure out is just when their home's equity rises above the 20% point. A certified, Oregon licensed real estate appraiser can surely help. It is an appraiser's job to understand the market dynamics of their area. At DuBose Appraisal Service, we know when property values have risen or declined. We're masters at pinpointing value trends in Portland, Washington County, and surrounding areas. Faced with information from an appraiser, the mortgage company will most often cancel the PMI with little effort. At that time, the homeowner can delight in 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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