Let Covenant Appraisals help you decide if you can eliminate your PMIWhen buying a house, a 20% down payment is usually the standard. Because the risk for the lender is oftentimes only the remainder between the home value and the amount remaining on the loan, the 20% adds a nice cushion against the charges of foreclosure, selling the home again, and typical value fluctuations in the event a purchaser doesn't pay.The market was taking down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the added risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower doesn't pay on the loan and the value of the house is less than what the borrower still owes on the loan. Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and on many occasions isn't even tax deductible, PMI can be pricey to a borrower. It's lucrative for the lender because they acquire the money, and they get the money if the borrower is unable to pay, as opposed to a piggyback loan where the lender takes in all the deficits.
How can a homebuyer avoid paying PMI?With the passage of The Homeowners Protection Act of 1998, lenders are required to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount on most loans. Keen homeowners can get off the hook beforehand. The law pledges that, at the request of the home owner, the PMI must be released when the principal amount equals just 80 percent.Considering it can take several years to get to the point where the principal is just 80% of the initial amount of the loan, it's necessary to know how your Maryland home has appreciated in value. After all, all of the appreciation you've acquired over time counts towards dismissing PMI. So why pay it after your loan balance has dropped below the 80% mark? Your neighborhood might not follow national trends and/or your home could have secured equity before the economy simmered down. So even when nationwide trends indicate decreasing home values, you should know most importantly that real estate is local. The difficult thing for most consumers to determine is just when their home's equity rises above the 20% point. An accredited, Maryland licensed real estate appraiser can definitely help. It's an appraiser's job to keep up with the market dynamics of their area. At Covenant Appraisals, we know when property values have risen or declined. We're experts at determining value trends in Baltimore, Baltimore County, and surrounding areas. When faced with figures from an appraiser, the mortgage company will usually cancel the PMI with little trouble. 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: Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year
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