Riverpoint Appraisals can help you remove your Private Mortgage InsuranceIt's generally known that a 20% down payment is the standard when purchasing a home. Since the liability for the lender is often only the difference between the home value and the sum outstanding on the loan, the 20% provides a nice cushion against the charges of foreclosure, selling the home again, and typical value fluctuations on the chance that a borrower is unable to pay.
Lenders were accepting down payments dropping to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the added risk of the low down payment with Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower defaults on the loan and the market price of the house is lower than the loan balance.
PMI can be costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and often isn't even tax deductible. Separate from a piggyback loan where the lender absorbs all the costs, PMI is beneficial for the lender because they obtain the money, and they get paid if the borrower defaults.
How can home buyers prevent bearing the cost of PMI?The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law promises that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent. So, savvy home owners can get off the hook ahead of time.
Considering it can take many years to reach the point where the principal is only 80% of the original loan amount, it's necessary to know how your Virginia home has grown in value. After all, any appreciation you've accomplished over time counts towards dismissing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Even when nationwide trends signify decreasing home values, be aware that real estate is local. Your neighborhood may not be adopting the national trends and/or your home could have acquired equity before things declined.
A certified, Virginia licensed real estate appraiser can help homeowners figure out just when their home's equity goes over the 20% point, as it's a hard thing to know. It's an appraiser's job to recognize the market dynamics of their area. At Riverpoint Appraisals, we know when property values have risen or declined. We're masters at analyzing value trends in Leesburg, Loudoun County, and surrounding areas. When faced with information from an appraiser, the mortgage company will often remove the PMI with little effort. At which time, the home owner can enjoy 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