Let Amerifirst Appraisal Company, Inc. help you determine if you can eliminate your PMIWhen buying a house, a 20% down payment is usually the standard. The lender's liability is often only the remainder between the home value and the amount outstanding on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and natural value variations on the chance that a borrower defaults.
During the recent mortgage upturn of the mid 2000s, it became widespread to see lenders only asking for down payments of 10, 5 or often 0 percent. A lender is able to manage the increased risk of the low down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower defaults on the loan and the market price of the home is less than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and oftentimes isn't even tax deductible, PMI is pricey to a borrower. Unlike a piggyback loan where the lender consumes all the losses, PMI is profitable for the lender because they secure the money, and they get paid if the borrower is unable to pay.
How home buyers can keep from paying PMIThe Homeowners Protection Act of 1998 makes the lenders on the majority of loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law designates that, at the request of the home owner, the PMI must be released when the principal amount equals only 80 percent. So, acute homeowners can get off the hook ahead of time.
Because it can take several years to reach the point where the principal is only 80% of the original amount of the loan, it's important to know how your Maine home has grown in value. After all, any appreciation you've achieved over the years counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Even when nationwide trends forecast decreasing home values, be aware that real estate is local. Your neighborhood may not be following the national trends and/or your home may have acquired equity before things simmered down.
A certified, Maine licensed real estate appraiser can help homeowners figure out just when their home's equity goes over 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 Amerifirst Appraisal Company, Inc., we know when property values have risen or declined. We're experts at determining value trends in Lewiston, Androscoggin County, and surrounding areas. When faced with information from an appraiser, the mortgage company will often remove the PMI with little anxiety. At which time, the home owner can retain the savings from that point on.
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