Premier Appraisal of SoCal can help you remove your Private Mortgage Insurance
It's typically known that a 20% down payment is accepted when purchasing a home. Because the liability for the lender is oftentimes only the remainder between the home value and the sum remaining on the loan, the 20% adds a nice cushion against the costs of foreclosure, reselling the home, and natural value changeson the chance that a borrower defaults.
During the recent mortgage boom of the last decade, it became common to see lenders commanding down payments of 10, 5 or often 0 percent. A lender is able to manage the increased risk of the small down payment with Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower is unable to pay on the loan and the worth of the home is less than the balance of the loan.
PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and many times isn't even tax deductible. It's lucrative for the lender because they secure the money, and they receive payment if the borrower defaults, different from a piggyback loan where the lender takes in all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home buyers avoid paying PMI?
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law guarantees that, upon request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent. So, wise homeowners can get off the hook a little earlier.
Considering it can take countless years to arrive at the point where the principal is just 20% of the original amount of the loan, it's crucial to know how your home has appreciated in value. After all, every bit of appreciation you've achieved over time counts towards removing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Even when nationwide trends forecast declining home values, be aware that real estate is local. Your neighborhood might not be heeding the national trends and/or your home might have secured equity before things cooled off.
The toughest thing for most homeowners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can definitely help. It is an appraiser's job to understand the market dynamics of their area. At Premier Appraisal of SoCal, we know when property values have risen or declined. We're experts at analyzing value trends in Mission Viejo, Orange County and surrounding areas. Faced with figures from an appraiser, the mortgage company will often do away with the PMI with little effort. At which time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: