Let The Appraisal Shoppe, Inc. help you learn if you can get rid of your PMI
A 20% down payment is usually accepted when getting a mortgage. Considering the liability for the lender is oftentimes only the remainder between the home value and the sum due on the loan, the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and typical value changeson the chance that a borrower doesn't pay.
During the recent mortgage upturn of the mid 2000s, it was customary to see lenders commanding down payments of 10, 5 or even 0 percent. How does a lender endure the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This added policy protects the lender in the event a borrower is unable to pay on the loan and the worth of the house is less than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and oftentimes isn't even tax deductible, PMI can be costly to a borrower. Unlike a piggyback loan where the lender takes in all the costs, PMI is beneficial for the lender because they obtain the money, and they get paid 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 home buyers refrain from bearing the expense of PMI?
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Acute home owners can get off the hook sooner than expected. The law guarantees that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent.
Considering it can take countless years to reach the point where the principal is just 20% of the original loan amount, it's necessary to know how your home has appreciated in value. After all, any appreciation you've obtained over time counts towards removing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Even when nationwide trends indicate falling home values, understand that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home may have gained equity before things calmed down.
The difficult thing for many homeowners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can certainly help. As appraisers, it's our job to recognize the market dynamics of our 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 information from an appraiser, the mortgage company will often drop the PMI with little effort. At that time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: