Let Brennan Appraisal Services help you learn if you can eliminate your PMIA 20% down payment is typically the standard when getting a mortgage. Since the liability for the lender is usually only the difference between the home value and the amount outstanding on the loan, the 20% provides a nice buffer against the costs of foreclosure, selling the home again, and typical value variations in the event a purchaser doesn't pay.Banks were accepting down payments discounted to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the additional risk of the small down payment with Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower is unable to pay 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 on many occasions isn't even tax deductible, PMI is costly to a borrower. Unlike a piggyback loan where the lender takes in all the deficits, PMI is favorable for the lender because they secure the money, and they get paid if the borrower doesn't pay.
How can a home owner keep from bearing the expense of PMI?The Homeowners Protection Act of 1998 requires the lenders on the majority of loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Savvy homeowners can get off the hook ahead of time. The law promises that, upon request of the home owner, the PMI must be released when the principal amount reaches just 80 percent.Considering it can take several years to arrive at the point where the principal is only 80% of the original amount borrowed, it's important to know how your Virginia home has increased in value. After all, every bit of appreciation you've accomplished over the years counts towards removing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends predict falling home values, understand 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 tough thing to know. It is an appraiser's job to understand the market dynamics of their area. At Brennan Appraisal Services, we're experts at identifying value trends in Waynesboro, Waynesboro City County, and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will usually cancel the PMI with little trouble. At that time, the homeowner 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
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