Have equity in your home? Want a lower payment? An appraisal from Brian Hawley Appraisals can help you get rid of your PMI.A 20% down payment is usually the standard when purchasing a home. Considering the risk for the lender is often only the difference 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 natural value fluctuations on the chance that a purchaser is unable to pay.Lenders were accepting down payments discounted to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender manage the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower doesn't pay on the loan and the market price of the property is lower than the loan balance. Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and frequently isn't even tax deductible, PMI is costly to a borrower. As opposed to a piggyback loan where the lender takes in all the damages, PMI is lucrative for the lender because they obtain the money, and they get the money if the borrower is unable to pay.
How can home buyers prevent paying PMI?With the implementation of The Homeowners Protection Act of 1998, lenders are obligated to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount on most loans. The law promises that, upon request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent. So, wise home owners can get off the hook sooner than expected.It can take a significant number of years to reach the point where the principal is only 80% of the original amount of the loan, so it's crucial to know how your Pennsylvania home has grown in value. After all, all of the appreciation you've achieved over the years counts towards removing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not adhere to national trends and/or your home might have secured equity before the economy declined. So even when nationwide trends forecast a reduction in home values, you should know most importantly that real estate is local. An accredited, Pennsylvania licensed real estate appraiser can help homeowners figure out just when their home's equity goes over the 20% point, as it's a tough thing to know. It's an appraiser's job to keep up with the market dynamics of their area. At Brian Hawley Appraisals, we know when property values have risen or declined. We're experts at determining value trends in Allentown, Lehigh County, and surrounding areas. Faced with data from an appraiser, the mortgage company will generally eliminate the PMI with little trouble. At which 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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