Have equity in your home? Want a lower payment? An appraisal from NEW ENGLAND APPRAISAL SERVICES LTD can help you get rid of your PMI.It's largely inferred that a 20% down payment is accepted when getting a mortgage. The lender's only liability is generally just the difference between the home value and the balance outstanding on the loan, so the 20% provides a nice buffer against the expenses of foreclosure, reselling the home, and typical value changes in the event a borrower doesn't pay.
During the recent mortgage boom that our country recently experienced, it was customary to see lenders only asking for down payments of 10, 5, 3 or even 0 percent. A lender is able to endure the increased risk of the low down payment with Private Mortgage Insurance or PMI. This supplementary plan protects the lender in case a borrower defaults on the loan and the value of the property is lower than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and oftentimes isn't even tax deductible, PMI can be costly to a borrower. It's money-making for the lender because they collect the money, and they get the money if the borrower is unable to pay, different from a piggyback loan where the lender absorbs all the costs.
How can home owners keep from paying PMI?With the implementation of The Homeowners Protection Act of 1998, lenders are forced to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount on nearly all loans. The law stipulates that, at the request of the home owner, the PMI must be dropped when the principal amount equals just 80 percent. So, keen home owners can get off the hook ahead of time.
It can take several years to get to the point where the principal is only 80% of the original loan amount, so it's important to know how your Massachusetts home has increased in value. After all, any appreciation you've achieved over the years counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% mark? Even when nationwide trends hint at lower overall home values, realize that real estate is local. Your neighborhood might not be heeding the national trends and/or your home could have secured equity before things declined.
A certified, Massachusetts licensed real estate appraiser can help home owners 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 keep up with the market dynamics of their area. At NEW ENGLAND APPRAISAL SERVICES LTD, we know when property values have risen or declined. We're masters at determining value trends in NEEDHAM, Norfolk County, and surrounding areas. When faced with figures from an appraiser, the mortgage company will most often do away with the PMI with little anxiety. At that time, the homeowner can enjoy the savings from that point on.
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