The Appraisal Shoppe, Inc. can help you remove your Private Mortgage Insurance
When purchasing a home, a 20% down payment is typically the standard. The lender's risk is generally only the remainder between the home value and the amount outstanding on the loan, so the 20% supplies a nice buffer against the expenses of foreclosure, reselling the home, and natural value fluctuations in the event a purchaser defaults.
During the recent mortgage upturn of the last decade, it was widespread to see lenders requiring down payments of 10, 5 or sometimes 0 percent. How does a lender handle the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplementary plan takes care of the lender if a borrower is unable to pay on the loan and the worth of the property is less than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and frequently isn't even tax deductible, PMI is costly to a borrower. It's beneficial for the lender because they collect the money, and they get the money if the borrower doesn't pay, opposite from a piggyback loan where the lender takes in all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home owner avoid bearing the expense of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Wise homeowners can get off the hook sooner than expected. The law states that, at the request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent.
Because it can take countless years to get to the point where the principal is just 20% of the initial loan amount, it's essential to know how your home has grown in value. After all, every bit of appreciation you've achieved over the years counts towards abolishing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold? Despite the fact that nationwide trends hint at declining home values, be aware that real estate is local. Your neighborhood might not be heeding the national trends and/or your home might have gained equity before things simmered down.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. It's an appraiser's job to understand the market dynamics of their area. At The Appraisal Shoppe, Inc., we know when property values have risen or declined. We're masters at identifying value trends in Virginia Beach, Virginia Beach City County and surrounding areas. Faced with figures from an appraiser, the mortgage company will most often eliminate the PMI with little effort. At which time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: