Let Flagship Appraisal help you figure out if you can cancel your PMIA 20% down payment is typically accepted when purchasing a home. Considering the liability for the lender is usually only the remainder between the home value and the amount remaining on the loan, the 20% adds a nice cushion against the charges of foreclosure, selling the home again, and natural value changes in the event a borrower doesn't pay.The market was taking down payments dropping to 10, 5 and frequently 0 percent during the mortgage boom of the last decade. How does a lender endure the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This added plan takes care of the lender in the event a borrower defaults on the loan and the market price of the home is less than the balance of the loan. PMI is costly to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and frequently isn't even tax deductible. Different from a piggyback loan where the lender absorbs all the losses, PMI is favorable for the lender because they acquire the money, and they get paid if the borrower defaults.
How can homeowners prevent bearing the expense of PMI?The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Savvy home owners can get off the hook ahead of time. The law designates that, upon request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent.It can take a significant number of years to arrive at the point where the principal is only 80% of the original amount borrowed, so it's necessary to know how your Virginia home has appreciated in value. After all, all of the appreciation you've acquired over the years counts towards dismissing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Even when nationwide trends indicate declining home values, be aware that real estate is local. Your neighborhood may not be minding the national trends and/or your home could have acquired equity before things declined. The difficult thing for most homeowners to determine is whether their home equity has exceeded the 20% point. An accredited, Virginia licensed real estate appraiser can surely help. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Flagship Appraisal, we're experts at determining value trends in Burke, Fairfax County, and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will usually remove 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: Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year
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