Western Maine Appraisal Services can help you remove your Private Mortgage InsuranceIt's widely understood that a 20% down payment is common when getting a mortgage. The lender's only liability is generally just the remainder between the home value and the sum due on the loan, so the 20% provides a nice cushion against the costs of foreclosure, reselling the home, and typical value variations on the chance that a borrower doesn't pay.Lenders were working with down payments dropping to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. How does a lender endure the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI guards the lender if a borrower defaults on the loan and the market price of the home is lower than the loan balance. Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and frequently isn't even tax deductible, PMI is costly to a borrower. It's lucrative for the lender because they collect the money, and they get paid if the borrower doesn't pay, in contrast to a piggyback loan where the lender takes in all the losses.
How can a homeowner refrain from bearing the expense of PMI?The Homeowners Protection Act of 1998 forces the lenders on the majority of loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Keen homeowners can get off the hook a little earlier. The law designates that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent.It can take a significant number of years to reach the point where the principal is just 80% of the initial loan amount, so it's important to know how your Maine home has grown in value. After all, every bit of appreciation you've achieved over time counts towards abolishing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Your neighborhood might not conform to national trends and/or your home may have acquired equity before the economy simmered down. So even when nationwide trends forecast a reduction in home values, you should understand that real estate is local. A certified, Maine licensed real estate appraiser can help home owners figure out just when their home's equity goes over 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 Western Maine Appraisal Services, we know when property values have risen or declined. We're masters at analyzing value trends in Peru, Oxford County, and surrounding areas. When faced with information from an appraiser, the mortgage company will generally cancel the PMI with little trouble. At that time, the home owner can retain 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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