Private Mortgage Insurance
Shreveport - Bossier City LA
Devereux Appraisal Company, LLC can help you remove your Private Mortgage InsuranceA 20% down payment is usually the standard when getting a mortgage. Since the liability for the lender is generally only the remainder between the home value and the amount outstanding on the loan, the 20% adds a nice cushion against the charges of foreclosure, selling the home again, and natural value changes on the chance that a borrower defaults.
During the recent mortgage upturn that our country recently experienced, it became customary to see lenders making deals with down payments of 10, 5, 3 or even 0 percent. How does a lender endure the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This supplementary policy guards the lender in case a borrower doesn't pay on the loan and the market price of the house is less than what the borrower still owes on the loan.
PMI is pricey to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and frequently isn't even tax deductible. Unlike a piggyback loan where the lender absorbs all the losses, PMI is advantageous for the lender because they obtain the money, and they are covered if the borrower defaults.
How can home buyers refrain from bearing the expense of PMI?The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law designates that, at the request of the home owner, the PMI must be released when the principal amount equals just 80 percent. So, wise homeowners can get off the hook a little early.
It can take several years to reach the point where the principal is only 80% of the initial amount of the loan, so it's essential to know how your Louisiana home has grown in value. After all, any appreciation you've accomplished over the years counts towards dismissing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Your neighborhood may not adhere to national trends and/or your home could have acquired equity before things simmered down. So even when nationwide trends predict falling home values, you should realize that real estate is local.
An accredited, Louisiana 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. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Devereux Appraisal Company, LLC, we're masters at identifying value trends in Shreveport, Caddo County, and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will most often do away with the PMI with little effort. At which time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link:
At Devereux Appraisal Co., LLC, we believe the difference should be obvious from the start. Use our fast contact form or call or e-mail us for fast disposition of your Shreveport and Bossier City area appraisal needs.