Premier Appraisal Group can help you remove your Private Mortgage InsuranceWhen buying a house, a 20% down payment is typically the standard. Considering the risk for the lender is oftentimes only the remainder between the home value and the amount outstanding on the loan, the 20% provides a nice buffer against the charges of foreclosure, selling the home again, and regular value variations in the event a borrower doesn't pay.During the recent mortgage boom that our country recently experienced, it was customary to see lenders reducing down payments to 10, 5, 3 or often 0 percent. A lender is able to handle the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower doesn't pay on the loan and the value of the home is less than the loan balance. Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and frequently isn't even tax deductible, PMI is costly to a borrower. It's profitable for the lender because they secure the money, and they receive payment if the borrower doesn't pay, different from a piggyback loan where the lender absorbs all the costs.
How can home buyers prevent paying PMI?With the implementation of The Homeowners Protection Act of 1998, lenders are forced to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount on most loans. Savvy homeowners can get off the hook a little early. The law pledges that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent.It can take several years to reach the point where the principal is just 80% of the original amount borrowed, so it's necessary to know how your Virginia home has increased in value. After all, all of the appreciation you've achieved over time counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Your neighborhood may not conform to national trends and/or your home could have gained equity before the economy cooled off. So even when nationwide trends signify falling home values, you should understand that real estate is local. The toughest thing for almost all consumers to figure out is whether their home equity has exceeded the 20% point. An accredited, Virginia licensed real estate appraiser can definitely help. It is an appraiser's job to keep up with the market dynamics of their area. At Premier Appraisal Group, we know when property values have risen or declined. We're masters at determining value trends in Richmond, Richmond City County, and surrounding areas. When faced with data from an appraiser, the mortgage company will often do away with 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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