Let The Appraisal Shoppe, Inc. help you determine if you can get rid of your PMI
It's largely understood that a 20% down payment is accepted when getting a mortgage. The lender's liability is generally only the difference between the home value and the amount remaining on the loan, so the 20% adds a nice cushion against the charges of foreclosure, selling the home again, and typical value fluctuations on the chance that a purchaser is unable to pay.
Lenders were working with down payments down to 10, 5 and often 0 percent during the mortgage boom of the last decade. A lender is able to endure the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower is unable to pay on the loan and the market price of the home is less than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and often isn't even tax deductible, PMI can be pricey to a borrower. Opposite from a piggyback loan where the lender absorbs all the costs, PMI is beneficial for the lender because they obtain the money, and they receive payment if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a buyer avoid bearing the expense of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law stipulates that, at the request of the home owner, the PMI must be released when the principal amount equals just 80 percent. So, savvy homeowners can get off the hook ahead of time.
Since it can take countless years to arrive at the point where the principal is only 20% of the original loan amount, it's essential to know how your home has appreciated in value. After all, every bit of appreciation you've accomplished over the years counts towards abolishing PMI. So why pay it after your loan balance has fallen below the 80% mark? Your neighborhood may not be minding the national trends and/or your home might have secured equity before things cooled off, so even when nationwide trends hint at declining home values, you should understand that real estate is local.
The difficult thing for many homeowners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can certainly help. It's an appraiser's job to keep up with the market dynamics of their area. At The Appraisal Shoppe, Inc., we know when property values have risen or declined. We're experts at pinpointing value trends in Virginia Beach, Virginia Beach City County and surrounding areas. Faced with information from an appraiser, the mortgage company will often eliminate the PMI with little anxiety. At that 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: