Have equity in your home? Want a lower payment? An appraisal from Sun Valuations can help you get rid of your PMI.It's typically known that a 20% down payment is the standard when buying a house. The lender's only risk is typically just the remainder between the home value and the balance remaining on the loan, so the 20% supplies a nice buffer against the costs of foreclosure, reselling the home, and regular value variations in the event a purchaser doesn't pay.During the recent mortgage upturn of the mid 2000s, it became common to see lenders only asking for down payments of 10, 5 or even 0 percent. How does a lender handle the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI protects the lender if a borrower defaults on the loan and the market price of the house is less than the loan balance. PMI is costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and many times isn't even tax deductible. It's beneficial for the lender because they collect the money, and they are covered if the borrower defaults, separate from a piggyback loan where the lender consumes all the losses.
How can homeowners prevent bearing the expense of PMI?With the passage of The Homeowners Protection Act of 1998, lenders are forced to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the original loan amount on most loans. The law promises that, upon request of the homeowner, the PMI must be released when the principal amount equals only 80 percent. So, savvy homeowners can get off the hook sooner than expected.It can take a significant number of years to arrive at the point where the principal is just 80% of the original amount borrowed, so it's essential to know how your Pennsylvania home has increased in value. After all, every bit of appreciation you've accomplished over the years counts towards dismissing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Your neighborhood may not adhere to national trends and/or your home might have gained equity before things simmered down. So even when nationwide trends hint at declining home values, you should know most importantly that real estate is local. An accredited, Pennsylvania licensed real estate appraiser can help homeowners figure out if their equity has reached the 20% point, as it's a hard thing to know. As appraisers, it's our job to know the market dynamics of our area. At Sun Valuations, we know when property values have risen or declined. We're masters at identifying value trends in Clifton Heights, Delaware County, and surrounding areas. When faced with information from an appraiser, the mortgage company will generally remove the PMI with little anxiety. At that 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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