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 the standard when getting a mortgage. Since the risk for the lender is oftentimes only the remainder between the home value and the sum outstanding on the loan, the 20% supplies a nice cushion against the charges of foreclosure, reselling the home, and typical value changesin the event a purchaser is unable to pay.
The market was accepting 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 increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower doesn't pay on the loan and the market price of the property is less than what is owed on the loan.
PMI is pricey to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and generally isn't even tax deductible. It's profitable for the lender because they acquire the money, and they receive payment if the borrower is unable to pay, separate from a piggyback loan where the lender consumes all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homeowner prevent paying PMI?
The Homeowners Protection Act of 1998 makes 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. The law guarantees that, upon request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent. So, savvy home owners can get off the hook a little early.
Because it can take countless years to reach the point where the principal is only 20% of the initial amount of the loan, it's important to know how your home has appreciated in value. After all, all of the appreciation you've accomplished over time counts towards abolishing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Your neighborhood might not be adhering to the national trends and/or your home could have acquired equity before things simmered down, so even when nationwide trends signify declining home values, you should understand that real estate is local.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. As appraisers, it's our job to understand the market dynamics of our area. At Premier Appraisal of SoCal, we know when property values have risen or declined. We're experts at identifying value trends in Mission Viejo, Orange County and surrounding areas. When faced with figures from an appraiser, the mortgage company will generally remove the PMI with little trouble. At that time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: