Premier Appraisal of SoCal can help you remove your Private Mortgage Insurance
When purchasing a home, a 20% down payment is usually the standard. The lender's liability is generally only the difference between the home value and the sum remaining on the loan, so the 20% provides a nice buffer against the costs of foreclosure, selling the home again, and natural value changes in the event a borrower is unable to pay.
During the recent mortgage upturn of the last decade, it was common to see lenders taking down payments of 10, 5 or even 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 if a borrower is unable to pay on the loan and the value of the property is lower than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and often isn't even tax deductible, PMI is costly to a borrower. It's profitable for the lender because they acquire the money, and they get the money if the borrower is unable to pay, opposite from a piggyback loan where the lender absorbs all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home buyers can prevent bearing the expense of 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 reaches 78 percent of the original loan amount. The law stipulates that, at the request of the home owner, the PMI must be dropped when the principal amount equals just 80 percent. So, acute home owners can get off the hook a little earlier.
Considering it can take many years to arrive at the point where the principal is only 20% of the original loan amount, it's crucial to know how your home has appreciated in value. After all, any appreciation you've accomplished over the years counts towards abolishing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood might not be following the national trends and/or your home may have secured equity before things cooled off, so even when nationwide trends signify plummeting home values, you should understand that real estate is local.
A certified, 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 recognize the market dynamics of our area. At Premier Appraisal of SoCal, we're masters at identifying 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 most often do away with the PMI with little trouble. At which 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: