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 generally only the remainder between the home value and the amount outstanding on the loan, so the 20% adds a nice cushion against the charges of foreclosure, reselling the home, and natural value variations in the event a borrower defaults.
During the recent mortgage boom of the last decade, it became widespread to see lenders commanding down payments of 10, 5 or even 0 percent. A lender is able to endure the added risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower is unable to pay on the loan and the market price of the house is lower than the balance of the loan.
PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and many times isn't even tax deductible. Different from a piggyback loan where the lender takes in all the deficits, PMI is lucrative for the lender because they collect the money, and they get the money if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homeowners keep from bearing the cost of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Acute homeowners can get off the hook sooner than expected. The law stipulates that, at the request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent.
Considering it can take countless years to get to the point where the principal is only 20% of the initial loan amount, it's essential to know how your home has grown in value. After all, all of the appreciation you've achieved over the years counts towards dismissing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Your neighborhood may not be adopting the national trends and/or your home might have acquired equity before things cooled off, so even when nationwide trends forecast falling home values, you should understand that real estate is local.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. It is an appraiser's job to recognize the market dynamics of their area. At Premier Appraisal of SoCal, we know when property values have risen or declined. We're experts 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 which time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: