Have equity in your home? Want a lower payment? An appraisal from Pioneer Valley Appraisal can help you get rid of your PMI.When getting a mortgage, a 20% down payment is typically the standard.The lender's liability is usually only the remainder between the home value and the amount remaining on the loan, so the 20% supplies a nice cushion against the expenses of foreclosure, reselling the home, and natural value variations on the chance that a purchaser is unable to pay.The market was working with down payments dropping to 10, 5 and even 0 percent in the peak of last decade's mortgage boom.How does a lender manage the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI.PMI takes care of the lender if a borrower is unable to pay on the loan and the market price of the property is less than the balance of the loan. Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and many times isn't even tax deductible, PMI can be costly to a borrower.As opposed to a piggyback loan where the lender absorbs all the damages, PMI is profitable for the lender because they collect the money, and they get the money if the borrower is unable to pay.
How can home buyers keep from bearing the cost of PMI?With the passage of The Homeowners Protection Act of 1998, lenders are required to automatically stop the PMI when the principal balance of the loan equals 78 percent of the primary loan amount on nearly all loans.Savvy home owners can get off the hook a little earlier. The law guarantees that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent.Since it can take several years to get to the point where the principal is just 80% of the original loan amount, it's important to know how your Massachusetts home has appreciated in value.After all, all of the appreciation you've acquired over the years counts towards abolishing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends indicate lower overall home values, realize that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home may have secured equity before things declined. The difficult thing for many consumers to determine is just when their home's equity goes over the 20% point. A certified, Massachusetts licensed real estate appraiser can definitely help.As appraisers, it's our job to keep up with the market dynamics of our area.At Pioneer Valley Appraisal, we're experts at pinpointing value trends in Hampshire and Franklin County, and we know when property values have risen or declined.Faced with data from an appraiser, the mortgage company will generally eliminate the PMI with little trouble. At which time, the home owner 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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