The Appraisal Shoppe, Inc. can help you remove your Private Mortgage Insurance
It's generally understood that a 20% down payment is accepted when getting a mortgage. Considering the liability for the lender is usually only the difference between the home value and the sum remaining on the loan, the 20% adds a nice cushion against the charges of foreclosure, reselling the home, and natural value fluctuationsin the event a purchaser is unable to pay.
The market was accepting down payments as low as 10, 5 and often 0 percent during the mortgage boom of the last decade. A lender is able to manage the increased risk of the low down payment with Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower doesn't pay on the loan and the market price of the house is less than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and often isn't even tax deductible, PMI is costly to a borrower. It's advantageous for the lender because they obtain the money, and they get paid if the borrower doesn't pay, contradictory to a piggyback loan where the lender absorbs all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homebuyers avoid paying PMI?
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically cease 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 homeowner, the PMI must be dropped when the principal amount reaches only 80 percent. So, smart home owners can get off the hook a little earlier.
Since it can take many years to reach the point where the principal is only 20% of the initial loan amount, it's important to know how your home has grown in value. After all, all of the appreciation you've obtained over time counts towards removing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not be heeding the national trends and/or your home may have gained equity before things calmed down, so even when nationwide trends indicate plummeting home values, you should understand that real estate is local.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. As appraisers, it's our job to know the market dynamics of our 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 figures from an appraiser, the mortgage company will most often drop the PMI with little effort. At which time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: