Magee Appraisal Service can help you remove your Private Mortgage Insurance (PMI)A 20% down payment is typically the standard when purchasing a home. Considering the risk for the lender is usually only the remainder between the home value and the sum due on the loan, the 20% supplies a nice cushion against the costs of foreclosure, reselling the home, and natural value variations on the chance that a borrower doesn't pay.
Lenders were working with down payments as low as 10, 5 and frequently 0 percent during the mortgage boom of the mid 2000s. A lender is able to manage the added risk of the minimal down payment with Private Mortgage Insurance or PMI. This added policy protects the lender in the event a borrower is unable to pay on the loan and the market price of the home is lower than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and many times isn't even tax deductible, PMI is pricey to a borrower. It's beneficial for the lender because they acquire the money, and they get paid if the borrower defaults, unlike a piggyback loan where the lender takes in all the damages.
How can home owners prevent paying PMI?The Homeowners Protection Act of 1998 forces the lenders on the majority of loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Acute homeowners can get off the hook a little early. The law stipulates that, upon request of the home owner, the PMI must be released when the principal amount equals only 80 percent.
Since it can take several years to arrive at the point where the principal is just 80% of the original amount of the loan, it's important to know how your Maryland home has increased in value. After all, all of the appreciation you've acquired over time counts towards dismissing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Even when nationwide trends forecast falling home values, be aware that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home might have secured equity before things declined.
An accredited, Maryland licensed real estate appraiser can help homeowners figure out just when their home's equity rises above the 20% point, as it's a difficult thing to know. It is an appraiser's job to know the market dynamics of their area. At Magee Appraisal Service , we're masters at pinpointing value trends in Fredrick , Frederick County, and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will generally eliminate the PMI with little trouble. At which time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: