Have equity in your home? Want a lower payment? An appraisal from 1st Choice Valuation Services (207) 240-0991 can help you get rid of your PMI.A 20% down payment is typically the standard when purchasing a home. The lender's only exposure is typically just the remainder between the home value and the sum due on the loan, so the 20% provides a nice cushion against the charges of foreclosure, selling the home again, and natural value variations on the chance that a purchaser is unable to pay.
During the recent mortgage boom of the last decade, it was widespread to see lenders making deals with down payments of 10, 5 or sometimes 0 percent. How does a lender handle the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplementary policy guards the lender if a borrower doesn't pay on the loan and the market price of the home is less than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and oftentimes isn't even tax deductible, PMI can be expensive to a borrower. It's lucrative for the lender because they secure the money, and they get the money if the borrower doesn't pay, separate from a piggyback loan where the lender absorbs all the damages.
How home owners can avoid bearing the expense of PMIWith the passage of The Homeowners Protection Act of 1998, lenders are forced to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount on nearly all loans. The law states that, upon request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent. So, smart homeowners can get off the hook a little earlier.
Considering it can take many years to get to the point where the principal is only 80% of the original loan amount, it's necessary to know how your Maine home has appreciated in value. After all, all of the appreciation you've acquired over the years counts towards dismissing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Even when nationwide trends signify lower overall home values, be aware that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home could have secured equity before things cooled off.
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. As appraisers, it's our job to understand the market dynamics of our area. At 1st Choice Valuation Services (207) 240-0991, we're experts at analyzing value trends in Auburn, Franklin County, and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will often eliminate the PMI with little effort. At which time, the home owner can retain the savings from that point on.
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