Have equity in your home? Want a lower payment? An appraisal from Richard Mulderick FVM Appraisals can help you get rid of your PMI.When buying a house, a 20% down payment is typically the standard. Because the liability for the lender is generally only the remainder between the home value and the amount outstanding on the loan, the 20% provides a nice cushion against the charges of foreclosure, selling the home again, and natural value changes on the chance that a borrower is unable to pay.During the recent mortgage boom that our country recently experienced, it was widespread to see lenders reducing down payments to 10, 5, 3 or even 0 percent. A lender is able to handle the increased risk of the low down payment with Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower defaults on the loan and the value of the house is lower than the loan balance. PMI can be costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and oftentimes isn't even tax deductible. It's money-making for the lender because they obtain the money, and they get the money if the borrower is unable to pay, different from a piggyback loan where the lender consumes all the costs.
How can a homeowner avoid paying PMI?The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law designates that, at the request of the home owner, the PMI must be released when the principal amount equals only 80 percent. So, acute home owners 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 crucial to know how your Maryland home has appreciated in value. After all, all of the appreciation you've achieved over time counts towards abolishing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Your neighborhood may not follow national trends and/or your home may have gained equity before the economy cooled off. So even when nationwide trends hint at a reduction in home values, you should understand that real estate is local. An accredited, Maryland licensed real estate appraiser can help homeowners figure out if their equity has reached the 20% point, as it's a difficult thing to know. It's an appraiser's job to keep up with the market dynamics of their area. At Richard Mulderick FVM Appraisals, we're experts at determining value trends in STEVENSVILLE, Queen Annes County, and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will most often drop the PMI with little effort. At that 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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