Nordquist Appraisal can help you remove your Private Mortgage InsuranceA 20% down payment is usually accepted when buying a house. The lender's only liability is generally just the remainder between the home value and the sum remaining on the loan, so the 20% supplies a nice cushion against the expenses of foreclosure, selling the home again, and typical value variations in the event a purchaser is unable to pay.
The market was working with down payments discounted to 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. How does a lender handle the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender in the event 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.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and oftentimes isn't even tax deductible, PMI is pricey to a borrower. It's beneficial for the lender because they collect the money, and they get the money if the borrower defaults, separate from a piggyback loan where the lender absorbs all the costs.
How home buyers can refrain from bearing the expense of PMIThe Homeowners Protection Act of 1998 forces the lenders on the majority of loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law promises that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent. So, wise homeowners can get off the hook ahead of time.
Since it can take several years to arrive at the point where the principal is only 80% of the original amount of the loan, it's essential to know how your Pennsylvania home has appreciated in value. After all, all of the appreciation you've obtained over the years counts towards abolishing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Your neighborhood may not follow national trends and/or your home may have gained equity before things cooled off. So even when nationwide trends predict declining home values, you should understand that real estate is local.
The toughest thing for most people to figure out is just when their home's equity rises above the 20% point. An accredited, Pennsylvania licensed real estate appraiser can definitely help. It's an appraiser's job to keep up with the market dynamics of their area. At Nordquist Appraisal, we're masters at recognizing value trends in Pittsburgh, Allegheny County, and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will often do away with the PMI with little trouble. At that time, the home owner can delight in the savings from that point on.
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