Let Premier Appraisal of SoCal help you decide if you can get rid of your PMI
A 20% down payment is typically the standard when buying a house. Considering the liability for the lender is oftentimes only the remainder between the home value and the sum due on the loan, the 20% provides a nice buffer against the charges of foreclosure, selling the home again, and typical value variationsin the event a borrower defaults.
The market was accepting down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to endure the added risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower doesn't pay on the loan and the market price of the house is less than what is owed on the loan.
PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and oftentimes isn't even tax deductible. It's favorable for the lender because they acquire the money, and they get the money if the borrower is unable to pay, separate from a piggyback loan where the lender consumes all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homebuyer avoid bearing the expense of PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law promises that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent. So, acute home owners can get off the hook a little early.
Since it can take countless years to arrive at the point where the principal is just 20% of the initial amount borrowed, it's essential to know how your home has increased in value. After all, all of the appreciation you've obtained over time counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Even when nationwide trends signify declining home values, realize that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home could have gained equity before things simmered down.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. It's an appraiser's job to keep up with the market dynamics of their area. At Premier Appraisal of SoCal, we're experts at determining value trends in Mission Viejo, Orange County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will usually drop the PMI with little effort. At that 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: