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 typically accepted when getting a mortgage. Considering the liability for the lender is oftentimes only the remainder between the home value and the amount remaining on the loan, the 20% supplies a nice cushion against the expenses of foreclosure, reselling the home, and natural value variations in the event a purchaser is unable to pay.
Lenders were accepting down payments down to 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. How does a lender manage the added risk of the low 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 market price of the home is lower than what is owed on the loan.
PMI can be costly to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and generally isn't even tax deductible. Contradictory to a piggyback loan where the lender takes in all the deficits, PMI is beneficial for the lender because they obtain the money, and they get the money 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 homebuyers avoid bearing the cost of PMI?
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law states that, at the request of the home owner, the PMI must be dropped when the principal amount reaches only 80 percent. So, acute homeowners can get off the hook sooner than expected.
Since it can take many years to reach the point where the principal is only 20% of the initial amount of the loan, it's essential to know how your home has appreciated in value. After all, any appreciation you've achieved over the years counts towards abolishing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not be reflecting the national trends and/or your home may have secured equity before things cooled off, so even when nationwide trends forecast declining home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. As appraisers, it's our job to know the market dynamics of our area. At Premier Appraisal of SoCal, we know when property values have risen or declined. We're experts at identifying value trends in Mission Viejo, Orange County and surrounding areas. When faced with information from an appraiser, the mortgage company will usually remove the PMI with little anxiety. At that time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: