Let Craig Hartsgrove help you discover if you can get rid of your PMIWhen purchasing a home, a 20% down payment is usually the standard. Since the liability for the lender is usually only the remainder between the home value and the amount outstanding on the loan, the 20% supplies a nice buffer against the costs of foreclosure, reselling the home, and regular value variations in the event a purchaser doesn't pay.Banks were accepting down payments dropping to 10, 5 and often 0 percent during the mortgage boom of the last decade. A lender is able to handle the added risk of the low down payment with Private Mortgage Insurance or PMI. This added plan takes care of the lender in the event a borrower doesn't pay on the loan and the value of the house is lower than what the borrower still owes on the loan. 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 pricey to a borrower. It's profitable for the lender because they secure the money, and they receive payment if the borrower defaults, unlike a piggyback loan where the lender takes in all the costs.
How can a home owner avoid bearing the expense of PMI?With the passage of The Homeowners Protection Act of 1998, lenders are forced to automatically cease the PMI when the principal balance of the loan equals 78 percent of the primary loan amount on most loans. Savvy homeowners can get off the hook beforehand. The law promises that, upon request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent.It can take many years to reach the point where the principal is only 80% of the initial amount borrowed, so it's crucial to know how your Maine home has increased in value. After all, every bit of appreciation you've gained over the years counts towards dismissing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Your neighborhood might not adhere to national trends and/or your home may have secured equity before things simmered down. 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 goes over the 20% point, as it's a tough thing to know. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Craig Hartsgrove, we know when property values have risen or declined. We're masters at determining value trends in Patten, Penobscot County, and surrounding areas. When faced with figures from an appraiser, the mortgage company will most often remove the PMI with little anxiety. 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: Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year
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