Let Mark Neal Real Estate Appraisals help you learn if you can cancel your PMIA 20% down payment is typically accepted when buying a house. The lender's only risk is typically just the remainder between the home value and the sum due on the loan, so the 20% supplies a nice cushion against the costs of foreclosure, selling the home again, and typical value fluctuations in the event a borrower doesn't pay.During the recent mortgage upturn that our country recently experienced, it was widespread to see lenders reducing down payments to 10, 5 or even 0 percent. How does a lender manage the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplemental policy covers the lender in case a borrower defaults on the loan and the market price of the home is lower than the loan balance. Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and many times isn't even tax deductible, PMI is costly to a borrower. As opposed to a piggyback loan where the lender absorbs all the costs, PMI is profitable for the lender because they obtain the money, and they get the money if the borrower defaults.
How homeowners can refrain from bearing the cost of PMIWith the implementation of The Homeowners Protection Act of 1998, lenders are forced to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount on most loans. Acute home owners can get off the hook beforehand. The law pledges that, at the request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent.Considering it can take a significant number of years to reach the point where the principal is only 80% of the initial amount borrowed, it's crucial to know how your Virginia home has appreciated in value. After all, any appreciation you've accomplished over the years counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Your neighborhood might not adhere to national trends and/or your home may have gained equity before the economy simmered down. So even when nationwide trends indicate falling home values, you should realize that real estate is local. The toughest thing for almost all people to determine is whether their home equity has exceeded the 20% point. A certified, Virginia licensed real estate appraiser can certainly help. As appraisers, it's our job to recognize the market dynamics of our area. At Mark Neal Real Estate Appraisals, we're experts at identifying value trends in Dale City, Prince William County, and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will usually drop the PMI with little anxiety. At which time, the homeowner can relish 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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