Lyons Appraisal Services, LLC. can help you remove your Private Mortgage InsuranceWhen purchasing a home, a 20% down payment is typically the standard. Since the liability for the lender is usually 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 regular value changes on the chance that a purchaser defaults.
The market was working with down payments discounted to 10, 5 and frequently 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI guards the lender if a borrower defaults on the loan and the market price of the house is lower than what the borrower still owes on the loan.
PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and frequently isn't even tax deductible. It's money-making for the lender because they collect the money, and they are covered if the borrower doesn't pay, unlike a piggyback loan where the lender consumes all the deficits.
How homeowners can refrain from bearing the cost of PMIThe Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Wise homeowners can get off the hook a little earlier. The law guarantees that, at the request of the homeowner, the PMI must be released when the principal amount equals only 80 percent.
It can take several years to reach the point where the principal is just 80% of the original loan amount, so it's important to know how your Maryland home has appreciated in value. After all, any appreciation you've obtained over time counts towards abolishing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Even when nationwide trends indicate declining home values, be aware that real estate is local. Your neighborhood might not be heeding the national trends and/or your home could have secured equity before things cooled off.
A certified, Maryland licensed real estate appraiser can help home owners figure out just when their home's equity goes over the 20% point, as it's a difficult thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At Lyons Appraisal Services, LLC., we know when property values have risen or declined. We're masters at analyzing value trends in Frederick, Frederick County, and surrounding areas. When faced with data from an appraiser, the mortgage company will generally remove the PMI with little anxiety. At that time, the home owner can relish the savings from that point on.
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