Home Equity - Let the Market Eliminate Your Private Mortgage
In decades past, most people who were interested in obtaining
a home loan were required to put down at least 20% of the
purchase price. Those days are gone, and as home prices have
risen faster than incomes, the average down payment required by
lenders has dropped. In fact, it is often possible to buy a home
with no down payment at all. Nationally, the average down payment
is a 3%. It's nice to be able to buy a home with such a small
amount of ready cash, but there is a downside - if the down
payment is less than 20%, the lender requires that private
mortgage insurance (PMI) be added to the house note.
No one likes to pay PMI; the payment doesn't go towards paying
off the house and the payments aren't tax deductible. And the PMI
payments aren't trivial; the monthly PMI payment on a home priced
at the U.S. median price of $206,000 with a 3% down payment is
$129. Lenders require that borrowers pay PMI until the borrowed
amount becomes less than 80% of the value of the home. In years
past, this has meant that homeowners had to pay PMI until they
had paid enough of the loan balance to reduce the debt to less
than 80%. Times have changed, however, and many homeowners may be
eligible for a faster way to avoid the monthly PMI payments.
The exploding real estate market has driven home prices higher
than ever. Not only are the prices high, but the rate at which
they are increasing is astonishing. In some parts of the country,
home prices have doubled or even tripled in the last five years
alone. The savvy homeowner should keep an eye on the price of
housing in their local market, as the equity in his or her home
may rise above 20% through market appreciation alone. In most
markets, this is often happening quickly enough that homeowners
may be able to eliminate PMI less than two years after purchase,
even if they put a minimum amount of money down on the home.
A home appraisal is required to establish the equity to debt
ratio of the loan, and this typically costs several hundred
dollars. As that figure represents only a few months' PMI
payments, most everyone would be glad to pay for an appraisal.
Before doing so, contact your lender, as some lenders require PMI
for a specific length of time before it can be dropped. No one
likes to pay for private mortgage insurance, and thanks to an
unusually aggressive real estate market, few homebuyers today
should have to pay it for very long.
©Copyright 2005 by Retro Marketing.
Charles Essmeier is the owner of Retro Marketing, a firm
devoted to informational Websites, including End-Your-Debt.com, a
Website devoted to debt consolidation and credit
counseling information and HomeEquityHelp.net, a site devoted
to information on mortgages and home equity
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No stability without financial inclusion: SBPDAWN.comAnother source of funding for housing was created as Pakistan Mortgage Refinance Company (PMRC) by providing liquidity to banks for housing finance. The government (National Bank of Pakistan and Ministry of Finance) holds 49pc stake while private ...and more »
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