Have equity in your home? Want a lower payment? An appraisal from AAL APPRAISALS, LLC can help you get rid of your PMI.
When purchasing a home, a 20% down payment is usually the standard. The lender's liability is often only the difference between the home value and the amount due on the loan, so the 20% provides a nice buffer against the charges of foreclosure, selling the home again, and regular value changes on the chance that a borrower defaults.
Banks were accepting down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender manage the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI guards the lender if a borrower is unable to pay on the loan and the worth of the home is less than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI is costly to a borrower. It's money-making for the lender because they secure the money, and they receive payment if the borrower defaults, unlike a piggyback loan where the lender consumes all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can buyers keep from bearing the expense of PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Acute homeowners can get off the hook ahead of time. The law stipulates that, at the request of the homeowner, the PMI must be released when the principal amount equals just 80 percent.
It can take countless years to reach the point where the principal is just 20% of the original amount borrowed, so it's necessary to know how your home has grown in value. After all, every bit of appreciation you've obtained over the years counts towards removing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends indicate plummeting home values, realize that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home may have gained equity before things calmed down.
The hardest thing for many homeowners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can surely help. It's an appraiser's job to know the market dynamics of their area. At AAL APPRAISALS, LLC, we're masters at determining value trends in Springfield, 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 generally cancel the PMI with little effort. At which 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: