Let Premier Appraisal of SoCal help you determine if you can get rid of your PMI
A 20% down payment is usually accepted when purchasing a home. Considering the risk for the lender is usually only the difference between the home value and the amount due on the loan, the 20% provides a nice buffer against the charges of foreclosure, selling the home again, and natural value changeson the chance that a borrower defaults.
The market was working with down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender manage the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This additional plan takes care of the lender if a borrower defaults on the loan and the worth of the home is less than what the borrower still owes on the loan.
PMI can be expensive to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and frequently isn't even tax deductible. Contradictory to a piggyback loan where the lender takes in all the deficits, PMI is advantageous for the lender because they collect 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 prevent bearing the cost of PMI?
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Smart homeowners can get off the hook sooner than expected. The law designates that, upon request of the home owner, the PMI must be released when the principal amount equals just 80 percent.
Considering it can take countless years to reach the point where the principal is only 20% of the initial loan amount, it's important to know how your home has grown in value. After all, all of the appreciation you've acquired over the years counts towards removing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood may not be reflecting the national trends and/or your home could have secured equity before things calmed down, so even when nationwide trends signify falling 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 rises above the 20% point, as it's a difficult thing to know. It's an appraiser's job to know the market dynamics of their area. At Premier Appraisal of SoCal, we know when property values have risen or declined. We're masters at identifying value trends in Mission Viejo, Orange County and surrounding areas. Faced with figures from an appraiser, the mortgage company will generally do away with the PMI with little anxiety. At which time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: