Have equity in your home? Want a lower payment? An appraisal from Boivin Appraisals, Inc. can help you get rid of your PMI.It's widely understood that a 20% down payment is common when getting a mortgage. The lender's risk is often only the remainder between the home value and the sum due on the loan, so the 20% provides a nice buffer against the costs of foreclosure, reselling the home, and typical value variations in the event a borrower defaults.Lenders were working with down payments discounted to 10, 5 and frequently 0 percent during the mortgage boom of the last decade. How does a lender handle the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This additional plan takes care of the lender in the event a borrower doesn't pay on the loan and the value of the home is less than what is owed on the loan. Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and often isn't even tax deductible, PMI can be costly to a borrower. It's advantageous for the lender because they secure the money, and they get paid if the borrower defaults, as opposed to a piggyback loan where the lender absorbs all the damages.
How can buyers keep from bearing the cost of PMI?The Homeowners Protection Act of 1998 forces the lenders on the majority of loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Smart home owners can get off the hook sooner than expected. The law promises that, upon request of the homeowner, the PMI must be released when the principal amount equals only 80 percent.It can take several years to reach the point where the principal is just 80% of the initial loan amount, so it's necessary to know how your Illinois home has increased in value. After all, every bit of appreciation you've acquired over time counts towards abolishing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Even when nationwide trends signify decreasing home values, understand that real estate is local. Your neighborhood may not be following the national trends and/or your home may have acquired equity before things cooled off. A certified, Illinois licensed real estate appraiser can help homeowners figure out if their equity has made it to the 20% point, as it's a difficult thing to know. As appraisers, it's our job to understand the market dynamics of our area. At Boivin Appraisals, Inc., we're masters at identifying value trends in Lombard, Dupage 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 most often drop the PMI with little effort. At which time, the homeowner can enjoy 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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