Affiliated Appraisal Services can help you remove your Private Mortgage InsuranceIt's largely understood that a 20% down payment is common when getting a mortgage. Considering the liability for the lender is oftentimes only the difference between the home value and the sum due on the loan, the 20% adds a nice cushion against the costs of foreclosure, reselling the home, and regular value changes in the event a borrower defaults.During the recent mortgage upturn that our country recently experienced, it became customary to see lenders making deals with down payments of 10, 5, 3 or often 0 percent. A lender is able to manage the added risk of the minimal down payment with Private Mortgage Insurance or PMI. This supplementary plan protects the lender if a borrower is unable to pay on the loan and the value of the house is less than the loan balance. PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and frequently isn't even tax deductible. It's favorable for the lender because they secure the money, and they are covered if the borrower is unable to pay, unlike a piggyback loan where the lender absorbs all the costs.
How can a home owner avoid paying PMI?The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law stipulates that, at the request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent. So, acute home owners can get off the hook ahead of time.Because it can take many years to reach the point where the principal is only 80% of the initial loan amount, it's important to know how your Maine home has increased in value. After all, all of the appreciation you've gained over time counts towards dismissing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Even when nationwide trends forecast decreasing home values, be aware that real estate is local. Your neighborhood might not be adopting the national trends and/or your home may have gained equity before things simmered down. The difficult thing for almost all homeowners to figure out is whether their home equity has exceeded the 20% point. A certified, Maine licensed real estate appraiser can surely help. As appraisers, it's our job to understand the market dynamics of our area. At Affiliated Appraisal Services, we know when property values have risen or declined. We're experts at analyzing value trends in Kenduskeag, Penobscot County, and surrounding areas. When faced with information from an appraiser, the mortgage company will most often cancel the PMI with little trouble. At which time, the homeowner can delight in 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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