Michael Boyer Appraisal Service can help you remove your Private Mortgage InsuranceA 20% down payment is typically the standard when purchasing a home. The lender's liability is generally only the difference between the home value and the sum remaining on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, selling the home again, and natural value changes in the event a purchaser defaults.The market was working with down payments discounted to 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender handle the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This additional policy guards the lender in case a borrower is unable to pay on the loan and the value of the house is less than the balance of the loan. PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and frequently isn't even tax deductible. It's favorable for the lender because they secure the money, and they get the money if the borrower defaults, different from a piggyback loan where the lender takes in all the deficits.
How can a home buyer refrain from bearing the expense of PMI?As a result of The Homeowners Protection Act of 1998, lenders are obligated to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount on nearly all loans. Savvy homeowners can get off the hook sooner than expected. The law stipulates that, at the request of the home owner, the PMI must be dropped when the principal amount equals just 80 percent.It can take several years to reach the point where the principal is just 80% of the original amount of the loan, so it's crucial to know how your Virginia home has grown in value. After all, all of the appreciation you've achieved over time counts towards removing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Even when nationwide trends signify lower overall home values, understand that real estate is local. Your neighborhood may not be adopting the national trends and/or your home may have acquired equity before things simmered down. An accredited, Virginia licensed real estate appraiser can help homeowners figure out if their equity has exceeed the 20% point, as it's a difficult thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At Michael Boyer Appraisal Service, we're experts at analyzing value trends in Fairlawn, Pulaski 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 usually cancel the PMI with little anxiety. At that time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year
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