Have equity in your home? Want a lower payment? An appraisal from 1st Equity Appraisal Service can help you get rid of your PMI.It's widely inferred that a 20% down payment is the standard when getting a mortgage. Since the liability for the lender is often only the remainder between the home value and the amount outstanding on the loan, the 20% adds a nice buffer against the charges of foreclosure, selling the home again, and regular value fluctuations on the chance that a borrower is unable to pay.Banks were accepting down payments discounted to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the added risk of the small down payment with Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower is unable to pay on the loan and the value of the house is lower than the loan balance. PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and oftentimes isn't even tax deductible. Separate from a piggyback loan where the lender takes in all the losses, PMI is beneficial for the lender because they secure the money, and they get the money if the borrower doesn't pay.
How can a home buyer refrain from bearing the cost of PMI?With the implementation of The Homeowners Protection Act of 1998, lenders are obligated to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount on nearly all loans. Smart homeowners can get off the hook sooner than expected. The law designates that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent.Because it can take several years to reach the point where the principal is just 80% of the initial loan amount, it's necessary to know how your Virginia home has appreciated in value. After all, every bit of appreciation you've accomplished over the years counts towards abolishing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Your neighborhood might not adhere to national trends and/or your home may have gained equity before things cooled off. So even when nationwide trends predict falling home values, you should understand that real estate is local. An accredited, Virginia licensed real estate appraiser can help homeowners figure out just when their home's equity rises above the 20% point, as it's a difficult thing to know. As appraisers, it's our job to understand the market dynamics of our area. At 1st Equity Appraisal Service, we know when property values have risen or declined. We're experts at determining value trends in Woodbridge, Prince William County, and surrounding areas. Faced with data from an appraiser, the mortgage company will often eliminate the PMI with little effort. At which time, the homeowner can retain 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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