Have equity in your home? Want a lower payment? An appraisal from The McCartney Group can help you get rid of your PMI.When buying a house, a 20% down payment is usually the standard. Considering the risk for the lender is usually only the difference between the home value and the amount remaining on the loan, the 20% adds a nice buffer against the charges of foreclosure, reselling the home, and typical value fluctuations in the event a borrower defaults.During the recent mortgage boom that our country recently experienced, it became widespread to see lenders only asking for down payments of 10, 5, 3 or often 0 percent. How does a lender handle the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI guards the lender if a borrower is unable to pay on the loan and the value of the home is lower than the balance of the loan. Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and many times isn't even tax deductible, PMI is pricey to a borrower. It's favorable for the lender because they obtain the money, and they get the money if the borrower is unable to pay, separate from a piggyback loan where the lender takes in all the costs.
How can buyers keep from bearing the cost of PMI?The Homeowners Protection Act of 1998 obligates the lenders on the majority of loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law promises that, upon request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent. So, keen homeowners can get off the hook a little early.It can take many years to reach the point where the principal is just 80% of the original amount of the loan, so it's crucial to know how your Pennsylvania home has increased in value. After all, all of the appreciation you've gained over the years counts towards abolishing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Your neighborhood might not conform to national trends and/or your home may have acquired equity before things cooled off. So even when nationwide trends indicate decreasing home values, you should realize that real estate is local. The toughest thing for many people to determine is whether their home equity has exceeded the 20% point. An accredited, Pennsylvania licensed real estate appraiser can surely help. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At The McCartney Group, we're masters at recognizing value trends in Yardley, County, and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will most often remove the PMI with little trouble. At that time, the homeowner can retain 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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