Have equity in your home? Want a lower payment? An appraisal from Atlantic Appraisal Solutions, LLC can help you get rid of your PMI.When buying a house, a 20% down payment is typically the standard. Because the liability for the lender is often only the remainder between the home value and the amount remaining on the loan, the 20% supplies a nice cushion against the expenses of foreclosure, reselling the home, and typical value variations in the event a borrower is unable to pay.
During the recent mortgage boom that our country recently experienced, it was common to see lenders only asking for down payments of 10, 5, or even 0 percent. How does a lender handle the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This additional policy takes care of the lender in the event a borrower defaults on the loan and the market price of the property is less than what is owed on the loan.
PMI can be expensive to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and on many occasions isn't even tax deductible. It's favorable for the lender because they collect the money, and they are covered if the borrower doesn't pay, unlike a piggyback loan where the lender takes in all the deficits.
How homebuyers can prevent bearing the cost of PMIAs a result of The Homeowners Protection Act of 1998, lenders are required to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount on nearly all loans. The law guarantees that, at the request of the homeowner, the PMI must be released when the principal amount equals only 80 percent. So, keen home owners can get off the hook ahead of time.
It can take many years to arrive at the point where the principal is just 80% of the original loan amount, so it's crucial to know how your Virginia home has increased in value. After all, all of the appreciation you've obtained over time counts towards removing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends predict decreasing home values, realize that real estate is local. Your neighborhood might not be following the national trends and/or your home could have secured equity before things cooled off.
An accredited, Virginia licensed real estate appraiser can help homeowners figure out if their equity has made it to 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 Atlantic Appraisal Solutions, LLC, we know when property values have risen or declined. We're masters at pinpointing value trends in Hampton Roads and surrounding areas. Faced with information from an appraiser, the mortgage company will often drop the PMI with little trouble. 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:
Got a Question?
Do you have a question relating to real estate appraisals? We can help. Simply fill out the form below and we'll contact you with the answer, with no obligation to you. We guarantee your privacy.