Michelle Kroitzsh can help you remove your Private Mortgage InsuranceWhen purchasing a home, a 20% down payment is typically the standard. Considering the risk for the lender is oftentimes only the difference between the home value and the sum due on the loan, the 20% provides a nice cushion against the expenses of foreclosure, reselling the home, and typical value variations in the event a purchaser doesn't pay.Lenders were accepting down payments dropping 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. This supplemental plan covers the lender if a borrower is unable to pay on the loan and the market price of the home is lower than what the borrower still owes on the loan. PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible. It's money-making for the lender because they obtain the money, and they get the money if the borrower doesn't pay, different from a piggyback loan where the lender takes in all the losses.
How can a buyer avoid paying PMI?With the implementation of The Homeowners Protection Act of 1998, lenders are obligated to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount on nearly all loans. The law states that, at the request of the home owner, the PMI must be released when the principal amount equals just 80 percent. So, acute homeowners can get off the hook sooner than expected.It can take many years to get to the point where the principal is just 80% of the initial amount borrowed, so it's necessary to know how your Maine home has appreciated in value. After all, every bit of appreciation you've acquired over time counts towards abolishing PMI. So why pay it after your loan balance has dropped below the 80% mark? Even when nationwide trends forecast falling home values, realize that real estate is local. Your neighborhood might not be heeding the national trends and/or your home may have secured equity before things cooled off. An accredited, Maine licensed real estate appraiser can help homeowners 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 know the market dynamics of their area. At Michelle Kroitzsh, we know when property values have risen or declined. We're masters at analyzing value trends in Alfred, York County, and surrounding areas. Faced with data from an appraiser, the mortgage company will often do away with the PMI with little trouble. At which time, the homeowner can enjoy 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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