Have equity in your home? Want a lower payment? An appraisal from The Appraisal Shoppe, Inc. can help you get rid of your PMI.
It's typically known that a 20% down payment is accepted when getting a mortgage. Since the liability for the lender is usually only the remainder between the home value and the amount remaining on the loan, the 20% supplies a nice buffer against the charges of foreclosure, selling the home again, and natural value changeson the chance that a borrower doesn't pay.
The market was working with down payments down 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 small down payment? The solution is Private Mortgage Insurance or PMI. PMI protects the lender in the event a borrower doesn't pay on the loan and the market price of the property is lower than the loan balance.
PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and often isn't even tax deductible. Separate from a piggyback loan where the lender takes in all the deficits, PMI is lucrative for the lender because they collect the money, and they receive payment if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home buyer prevent bearing the expense of PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law states that, at the request of the home owner, the PMI must be released when the principal amount reaches just 80 percent. So, wise home owners can get off the hook a little early.
It can take countless years to reach the point where the principal is just 20% of the initial amount of the loan, so it's essential to know how your home has grown in value. After all, every bit of appreciation you've acquired over time counts towards abolishing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Your neighborhood might not be minding the national trends and/or your home could have acquired equity before things settled down, so even when nationwide trends indicate declining home values, you should realize that real estate is local.
The difficult thing for most home owners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can definitely help. As appraisers, it's our job to understand the market dynamics of our area. At The Appraisal Shoppe, Inc., we're experts at recognizing value trends in Virginia Beach, Virginia Beach City County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will often eliminate the PMI with little effort. At which time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: