Let Confidential Appraisal Services, LLC help you determine if you can eliminate your PMIIt's typically understood that a 20% down payment is common when purchasing a home. The lender's liability is often only the difference between the home value and the balance due on the loan, so the 20% supplies a nice cushion against the costs of foreclosure, selling the home again, and regular value fluctuations on the chance that a borrower defaults.
During the recent mortgage boom that our country recently experienced, it became common to see lenders reducing down payments to 10, 5, 3 or sometimes 0 percent. A lender is able to manage the increased risk of the small down payment with Private Mortgage Insurance or PMI. This supplementary policy takes care of the lender if a borrower doesn't pay on the loan and the value of the home is less than the balance of the loan.
PMI is pricey to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and on many occasions isn't even tax deductible. Unlike a piggyback loan where the lender takes in all the deficits, PMI is favorable for the lender because they obtain the money, and they are covered if the borrower doesn't pay.
How can a home owner avoid paying PMI?The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Smart home owners can get off the hook sooner than expected. The law guarantees that, at the request of the home owner, the PMI must be released when the principal amount equals just 80 percent.
Considering it can take several years to get to the point where the principal is just 80% of the initial amount of the loan, it's necessary to know how your Maine home has grown in value. After all, any appreciation you've gained over time counts towards abolishing PMI. So why pay it after your loan balance has fallen below the 80% mark? Your neighborhood may not follow national trends and/or your home might have acquired equity before the economy simmered down. So even when nationwide trends predict decreasing home values, you should realize that real estate is local.
An accredited, Maine licensed real estate appraiser can help home owners figure out if their equity has exceeed the 20% point, as it's a difficult thing to know. It's an appraiser's job to understand the market dynamics of their area. At Confidential Appraisal Services, LLC, we're experts at determining value trends in Lyman, York County, and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will often drop the PMI with little anxiety. At which time, the homeowner can delight in the savings from that point on.
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