Let The Appraisal Shoppe, Inc. help you figure out if you can cancel your PMI
A 20% down payment is typically accepted when getting a mortgage. Since the risk for the lender is oftentimes only the difference between the home value and the sum due on the loan, the 20% provides a nice cushion against the expenses of foreclosure, selling the home again, and typical value changeson the chance that a purchaser defaults.
During the recent mortgage upturn of the last decade, it became common to see lenders requiring down payments of 10, 5 or even 0 percent. A lender is able to handle the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. This additional policy takes care of the lender in the event a borrower defaults on the loan and the value of the property is lower than the balance of the loan.
PMI is pricey to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and oftentimes isn't even tax deductible. Unlike a piggyback loan where the lender absorbs all the costs, PMI is profitable for the lender because they collect 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 a buyer prevent bearing the cost of PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Keen home owners can get off the hook a little early. The law states that, at the request of the home owner, the PMI must be released when the principal amount reaches just 80 percent.
It can take countless years to arrive at the point where the principal is only 20% of the initial loan amount, so it's important to know how your home has increased in value. After all, every bit of appreciation you've achieved over time counts towards abolishing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Your neighborhood might not be adhering to the national trends and/or your home could have gained equity before things calmed down, so even when nationwide trends indicate plummeting home values, you should understand that real estate is local.
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 tough thing to know. 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 analyzing value trends in Virginia Beach, Virginia Beach City County and surrounding areas. When faced with information from an appraiser, the mortgage company will usually 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: