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 usually accepted when purchasing a home. The lender's risk is generally only the difference between the home value and the amount remaining on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and natural value fluctuations on the chance that a borrower is unable to pay.
The market was taking down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to endure the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. This supplemental plan guards the lender in case a borrower is unable to pay on the loan and the value of the house is lower than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and frequently isn't even tax deductible, PMI can be costly to a borrower. It's advantageous for the lender because they obtain the money, and they receive payment if the borrower is unable to pay, different from a piggyback loan where the lender consumes all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home owners can prevent bearing the cost of PMI
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Wise home owners can get off the hook a little earlier. The law promises that, upon request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent.
It can take many years to get to the point where the principal is only 20% of the original amount borrowed, so it's crucial to know how your home has increased in value. After all, every bit of appreciation you've acquired 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? Despite the fact that nationwide trends indicate plunging home values, understand that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home may have secured equity before things calmed down.
The difficult thing for almost all home owners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can definitely help. 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 masters at recognizing value trends in Mission Viejo, Orange County and surrounding areas. When faced with data from an appraiser, the mortgage company will often do away with the PMI with little anxiety. At that 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: