Have equity in your home? Want a lower payment? An appraisal from JM Appraisal Services can help you get rid of your PMI.It's typically understood that a 20% down payment is accepted when purchasing a home. The lender's only exposure is typically just the remainder between the home value and the amount due on the loan, so the 20% supplies a nice cushion against the expenses of foreclosure, reselling the home, and typical value fluctuations in the event a borrower is unable to pay.
The market was working with down payments dropping to 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. A lender is able to endure the added risk of the small down payment with Private Mortgage Insurance or PMI. PMI protects the lender if a borrower is unable to pay on the loan and the market price of the property is less than the balance of the loan.
PMI is costly to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and often isn't even tax deductible. Instead of a piggyback loan where the lender takes in all the losses, PMI is beneficial for the lender because they acquire the money, and they get paid if the borrower is unable to pay.
How can homeowners refrain from bearing the cost of PMI?The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law stipulates that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, keen homeowners can get off the hook a little earlier.
It can take many years to get to the point where the principal is just 80% of the initial amount borrowed, so it's necessary 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 what's the reason for paying 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 gained equity before the economy declined. So even when nationwide trends forecast a reduction in home values, you should know most importantly that real estate is local.
An accredited, Maine licensed real estate appraiser can help home owners figure out just when their home's equity rises above the 20% point, as it's a tough thing to know. It is an appraiser's job to recognize the market dynamics of their area. At JM Appraisal Services, we know when property values have risen or declined. We're experts at recognizing value trends in BREWER, Penobscot County, and surrounding areas. When faced with information from an appraiser, the mortgage company will generally do away with the PMI with little effort. At which time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: