A.P.E.R. Appraisals can help you remove your Private Mortgage InsuranceIt's largely understood that a 20% down payment is accepted when getting a mortgage. Because the liability for the lender is generally only the remainder between the home value and the amount outstanding on the loan, the 20% provides a nice cushion against the charges of foreclosure, selling the home again, and regular value changes in the event a borrower defaults.During the recent mortgage upturn of the mid 2000s, it became customary to see lenders making deals with down payments of 10, 5, 3 or sometimes 0 percent. A lender is able to manage the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. This added policy protects the lender in the event a borrower defaults on the loan and the value of the property is less than what the borrower still owes on the loan. Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible, PMI is costly to a borrower. Different from a piggyback loan where the lender consumes all the costs, PMI is beneficial for the lender because they collect the money, and they get paid if the borrower is unable to pay.
How can a homeowner keep from paying PMI?The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law designates that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent. So, wise home owners can get off the hook sooner than expected.It can take a significant number of years to get to the point where the principal is only 80% of the original amount borrowed, so it's crucial to know how your Virginia home has grown in value. After all, all of the appreciation you've obtained over the years counts towards abolishing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Your neighborhood might not adhere to national trends and/or your home might have acquired equity before the economy simmered down. So even when nationwide trends hint at decreasing 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. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At A.P.E.R. Appraisals, we know when property values have risen or declined. We're experts at pinpointing value trends in Mt. Sidney, Staunton City County, and surrounding areas. When faced with data from an appraiser, the mortgage company will generally cancel the PMI with little trouble. At that time, the homeowner can relish 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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