Let The Appraisal Shoppe, Inc. help you figure out if you can get rid of your PMI
It's widely understood that a 20% down payment is accepted when getting a mortgage. Since the liability for the lender is often only the remainder between the home value and the sum outstanding on the loan, the 20% provides a nice buffer against the costs of foreclosure, reselling the home, and natural value variationsin the event a purchaser is unable to pay.
During the recent mortgage upturn of the mid 2000s, it was widespread to see lenders requiring down payments of 10, 5 or even 0 percent. A lender is able to handle the added risk of the minimal down payment with Private Mortgage Insurance or PMI. This additional policy protects the lender in the event a borrower defaults on the loan and the value of the house is lower than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and oftentimes isn't even tax deductible, PMI can be pricey to a borrower. It's beneficial for the lender because they acquire the money, and they get the money if the borrower doesn't pay, unlike a piggyback loan where the lender consumes 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 buyers prevent bearing the expense of PMI?
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law pledges that, upon request of the home owner, the PMI must be released when the principal amount equals just 80 percent. So, keen home owners can get off the hook ahead of time.
It can take many years to get to the point where the principal is only 20% of the initial amount of the loan, so it's crucial to know how your home has increased in value. After all, all of the appreciation you've acquired over the years counts towards removing PMI. So why pay it after your loan balance has dropped below the 80% mark? Despite the fact that nationwide trends predict falling home values, realize that real estate is local. Your neighborhood may not be adopting the national trends and/or your home could have secured equity before things settled down.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. It is an appraiser's job to keep up with the market dynamics of their area. At The Appraisal Shoppe, Inc., we're masters at determining 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 generally do away with the PMI with little anxiety. At which time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: