Have equity in your home? Want a lower payment? An appraisal from Vail Appraisal, LLC can help you get rid of your PMI.When getting a mortgage, a 20% down payment is typically the standard. Considering the liability for the lender is generally only the remainder between the home value and the amount due on the loan, the 20% provides a nice buffer against the costs of foreclosure, reselling the home, and typical value fluctuations in the event a purchaser defaults.During the recent mortgage upturn that our country recently experienced, it became customary to see lenders making deals with down payments of 10, 5 or sometimes 0 percent. A lender is able to handle the added risk of the small down payment with Private Mortgage Insurance or PMI. This supplemental plan guards the lender in the event a borrower defaults on the loan and the value of the property is lower than the loan balance. PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and frequently isn't even tax deductible. Separate from a piggyback loan where the lender absorbs all the deficits, 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 home buyer prevent bearing the cost of PMI?The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Savvy homeowners can get off the hook a little early. The law designates that, at the request of the home owner, the PMI must be released when the principal amount reaches just 80 percent.It can take many years to arrive at the point where the principal is just 80% of the initial loan amount, so it's essential to know how your Virginia home has increased in value. After all, every bit of appreciation you've accomplished over the years counts towards abolishing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Your neighborhood may not adhere to national trends and/or your home might have secured equity before things simmered down. So even when nationwide trends hint at declining home values, you should understand that real estate is local. A certified, 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 hard thing to know. As appraisers, it's our job to know the market dynamics of our area. At Vail Appraisal, LLC, we're masters at recognizing value trends in Roanoke, Roanoke County, and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will generally remove the PMI with little anxiety. At that time, the homeowner can delight in 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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