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Let Schaeffer Appraisal Services help you figure out if you can cancel your PMI
It's largely understood that a 20% down payment is accepted when getting a mortgage.
Since the risk for the lender is generally only the remainder between the home value and the amount due on the loan, the 20% provides a nice cushion against the expenses of foreclosure, selling the home again, and natural value fluctuations in the event a borrower doesn't pay.
Lenders were accepting down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom.
A lender is able to manage the increased risk of the small down payment with Private Mortgage Insurance or PMI.
This additional plan covers the lender in the event a borrower doesn't pay on the loan and the market price of the house is lower than what is owed on the loan.
PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and oftentimes isn't even tax deductible.
It's profitable for the lender because they collect the money, and they get the money if the borrower is unable to pay, in contrast to a piggyback loan where the lender absorbs all the deficits.
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Does your monthly house payment have a lineitem for PMI? Call Schaeffer Appraisal Services today at 978-475-5612 or send us an e-mail. A new appraisal could save you thousands.
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How can homeowners prevent bearing the cost of PMI?
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount.
The law guarantees that, at the request of the home owner, the PMI must be released when the principal amount equals only 80 percent. So, wise homeowners can get off the hook ahead of time.
It can take several years to arrive at the point where the principal is only 80% of the original loan amount, so it's essential to know how your Massachusetts home has grown in value.
After all, any appreciation you've acquired over the years counts towards abolishing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold?
Your neighborhood may not conform to national trends and/or your home could have gained equity before things cooled off. So even when nationwide trends indicate declining home values, you should realize that real estate is local.
The difficult thing for most homeowners to figure out is just when their home's equity rises above the 20% point. An accredited, Massachusetts licensed real estate appraiser can definitely help.
Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job!
At Schaeffer Appraisal Services, we know when property values have risen or declined. We're masters at recognizing value trends in Andover, Essex County, and surrounding areas.
When faced with figures from an appraiser, the mortgage company will often drop the PMI with little trouble. At that time, the homeowner can relish the savings from that point on.
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Has your home value appreciated since you first purchased? Contact Schaeffer Appraisal Services today at 978-475-5612. You may be able to get rid of your Private Mortgage Insurance premium.
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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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