RL Carmichael & Assoc, Inc. can help you remove your Private Mortgage InsuranceA 20% down payment is usually the standard when getting a mortgage. Since the risk for the lender is oftentimes only the difference between the home value and the amount due on the loan, the 20% provides a nice cushion against the charges of foreclosure, selling the home again, and natural value changes on the chance that a purchaser doesn't pay.
The market was taking down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to endure the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. This additional policy takes care of the lender in case a borrower doesn't pay on the loan and the value of the property is less than what is owed on the loan.
PMI can be costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and frequently isn't even tax deductible. It's money-making for the lender because they obtain the money, and they are covered if the borrower is unable to pay, unlike a piggyback loan where the lender consumes all the losses.
How can a homeowner prevent bearing the cost of PMI?With the implementation of The Homeowners Protection Act of 1998, lenders are obligated to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount on most loans. The law states that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, acute homeowners can get off the hook ahead of time.
It can take several years to reach the point where the principal is only 80% of the original amount borrowed, so it's important to know how your Virginia home has increased in value. After all, all of the appreciation you've acquired over the years counts towards dismissing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Even when nationwide trends indicate lower overall home values, be aware that real estate is local. Your neighborhood may not be heeding the national trends and/or your home may have secured equity before things declined.
The toughest thing for many people to determine is whether their home equity has exceeded the 20% point. An accredited, Virginia licensed real estate appraiser can surely help. It is an appraiser's job to know the market dynamics of their area. At RL Carmichael & Assoc, Inc., we know when property values have risen or declined. We're experts at analyzing value trends in Chesapeake, Chesapeake City County, and surrounding areas. When faced with figures from an appraiser, the mortgage company will generally do away with the PMI with little anxiety. At that time, the home owner 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