Premier Appraisal of SoCal can help you remove your Private Mortgage Insurance
When purchasing a home, a 20% down payment is typically the standard. The lender's liability is often only the difference between the home value and the amount due on the loan, so the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and regular value changes on the chance that a borrower doesn't pay.
The market was working with down payments down to 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender endure the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI covers the lender if a borrower is unable to pay on the loan and the value of the house is less than the loan balance.
PMI is costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and often isn't even tax deductible. It's lucrative for the lender because they acquire the money, and they get paid if the borrower defaults, different from a piggyback loan where the lender absorbs all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homebuyers refrain from bearing the cost of PMI?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Wise home owners can get off the hook a little earlier. The law designates that, upon request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent.
Considering it can take countless years to arrive at the point where the principal is only 20% of the initial amount of the loan, it's essential to know how your home has increased in value. After all, all of the appreciation you've achieved over time counts towards removing 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 adopting the national trends and/or your home may have acquired equity before things simmered down, so even when nationwide trends forecast plummeting home values, you should understand that real estate is local.
The difficult thing for almost all homeowners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can surely help. As appraisers, it's our job to understand the market dynamics of our area. At Premier Appraisal of SoCal, we're experts at analyzing value trends in Mission Viejo, Orange County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will generally do away with the PMI with little trouble. At which time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: