Have equity in your home? Want a lower payment? An appraisal from The Appraisal Shoppe, Inc. can help you get rid of your PMI.
A 20% down payment is typically accepted when purchasing a home. Because the risk for the lender is oftentimes only the remainder between the home value and the sum remaining on the loan, the 20% supplies a nice buffer against the charges of foreclosure, selling the home again, and natural value fluctuationson the chance that a purchaser defaults.
During the recent mortgage boom of the last decade, it became common to see lenders taking down payments of 10, 5 or even 0 percent. A lender is able to handle the additional risk of the low down payment with Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower defaults on the loan and the worth of the property is lower than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI is pricey to a borrower. Separate from a piggyback loan where the lender absorbs all the losses, PMI is profitable for the lender because they acquire the money, and they receive payment if the borrower doesn't pay.
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 cost of PMI?
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Acute home owners can get off the hook beforehand. The law guarantees that, upon request of the homeowner, the PMI must be released when the principal amount equals just 80 percent.
Since it can take many years to get to the point where the principal is just 20% of the initial amount of the loan, it's necessary to know how your home has increased in value. After all, all of the appreciation you've accomplished over time counts towards removing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not be minding the national trends and/or your home could have secured equity before things calmed down, so even when nationwide trends indicate declining home values, you should realize that real estate is local.
The hardest thing for many home owners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can certainly help. As appraisers, it's our job to understand the market dynamics of our area. At The Appraisal Shoppe, Inc., we know when property values have risen or declined. We're experts at determining value trends in Virginia Beach, Virginia Beach City County and surrounding areas. When faced with data from an appraiser, the mortgage company will often eliminate the PMI with little effort. At that 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: