Have equity in your home? Want a lower payment? An appraisal from Foster Appraisal Services, LLC can help you get rid of your PMI.When getting a mortgage, a 20% down payment is usually the standard. The lender's liability is often only the remainder between the home value and the balance due on the loan, so the 20% supplies a nice buffer against the expenses of foreclosure, reselling the home, and regular value changes on the chance that a purchaser is unable to pay.
Banks were accepting down payments as low as 10, 5 and even 0 percent during the mortgage boom of the last decade. A lender is able to manage the increased risk of the low down payment with Private Mortgage Insurance or PMI. PMI covers the lender if a borrower defaults on the loan and the value of the property is lower than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible, PMI is pricey to a borrower. It's favorable for the lender because they acquire the money, and they are covered if the borrower is unable to pay, different from a piggyback loan where the lender absorbs all the costs.
How home owners can prevent bearing the expense of PMIAs a result of The Homeowners Protection Act of 1998, lenders are obligated to automatically stop the PMI when the principal balance of the loan equals 78 percent of the original loan amount on nearly all loans. The law designates that, upon request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent. So, keen homeowners can get off the hook a little earlier.
Because it can take many years to arrive at the point where the principal is only 80% of the original loan amount, it's crucial to know how your Maine home has grown in value. After all, any appreciation you've acquired over the years counts towards removing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not adhere to national trends and/or your home could have acquired equity before things declined. So even when nationwide trends signify falling home values, you should know most importantly that real estate is local.
The difficult thing for many consumers to figure out is just when their home's equity rises above the 20% point. A certified, Maine licensed real estate appraiser can certainly help. It is an appraiser's job to keep up with the market dynamics of their area. At Foster Appraisal Services, LLC, we're experts at determining value trends in Windham, Cumberland County, and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will often cancel 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: