Let The Appraisal Shoppe, Inc. help you determine if you can cancel your PMI
It's typically inferred that a 20% down payment is accepted when buying a house. Considering the liability for the lender is oftentimes only the remainder between the home value and the amount remaining on the loan, the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and typical value fluctuationsin the event a purchaser defaults.
During the recent mortgage upturn of the last decade, it was common to see lenders taking down payments of 10, 5 or often 0 percent. A lender is able to manage the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. This supplemental plan takes care of the lender in the event a borrower is unable to pay on the loan and the value of the home is less than what the borrower still owes on the loan.
PMI can be expensive to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and oftentimes isn't even tax deductible. It's lucrative for the lender because they collect the money, and they get paid if the borrower defaults, unlike a piggyback loan where the lender absorbs 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 a buyer prevent bearing the expense of PMI?
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law promises that, upon request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent. So, smart home owners can get off the hook ahead of time.
Because it can take many years to get to the point where the principal is only 20% of the original amount borrowed, it's necessary to know how your home has increased in value. After all, every bit of appreciation you've achieved over the years counts towards dismissing PMI. So why pay it after your loan balance has fallen below the 80% mark? Your neighborhood may not be adhering to the national trends and/or your home may have gained equity before things calmed down, so even when nationwide trends predict falling home values, you should realize that real estate is local.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. It's an appraiser's job to understand the market dynamics of their area. At The Appraisal Shoppe, Inc., we're experts at identifying value trends in Virginia Beach, Virginia Beach City County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will most often drop the PMI with little anxiety. 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: