Have equity in your home? Want a lower payment? An appraisal from Premier Appraisal of SoCal can help you get rid of your PMI.
A 20% down payment is usually the standard when getting a mortgage. The lender's liability is oftentimes only the difference between the home value and the amount remaining on the loan, so the 20% supplies a nice buffer against the expenses of foreclosure, reselling the home, and regular value fluctuations on the chance that a purchaser doesn't pay.
During the recent mortgage upturn of the mid 2000s, it was widespread to see lenders requiring down payments of 10, 5 or often 0 percent. How does a lender manage the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower defaults on the loan and the worth of the property is lower than what the borrower still owes on the loan.
PMI is pricey to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and many times isn't even tax deductible. Unlike a piggyback loan where the lender consumes all the damages, PMI is lucrative for the lender because they collect the money, and they receive payment if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homeowner prevent bearing the expense of PMI?
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law guarantees that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent. So, acute homeowners can get off the hook a little earlier.
It can take countless years to reach the point where the principal is just 20% of the original loan amount, so it's essential to know how your home has grown in value. After all, every bit of appreciation you've acquired over the years counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not be adhering to the national trends and/or your home may have acquired equity before things simmered down, so even when nationwide trends hint at plunging home values, you should understand that real estate is local.
The difficult thing for most home owners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can certainly help. It is an appraiser's job to understand the market dynamics of their area. At Premier Appraisal of SoCal, we're masters at recognizing value trends in Mission Viejo, Orange 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 that time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: