Appraisal-One can help you remove your Private Mortgage Insurance
It's typically understood that a 20% down payment is common when purchasing a home. The lender's risk is often only the difference between the home value and the amount remaining on the loan, so the 20% supplies a nice buffer against the costs of foreclosure, selling the home again, and typical value fluctuations in the event a purchaser defaults.
Banks were 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 low down payment with Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower is unable to pay on the loan and the market price of the home is lower than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and generally isn't even tax deductible, PMI is pricey to a borrower. It's favorable for the lender because they secure the money, and they get the money if the borrower doesn't pay, different from a piggyback loan where the lender takes in all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home buyers keep from paying PMI?
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Savvy homeowners can get off the hook ahead of time. The law guarantees that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent.
Considering it can take many years to arrive at the point where the principal is just 20% of the initial loan amount, it's crucial to know how your home has appreciated in value. After all, all of the appreciation you've accomplished over the years counts towards dismissing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood may not be adhering to the national trends and/or your home might have acquired equity before things settled down, so even when nationwide trends hint at plummeting home values, you should realize 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 tough thing to know. It is an appraiser's job to keep up with the market dynamics of their area. At Appraisal-One, we know when property values have risen or declined. We're experts at identifying value trends in Huntington Beach, Orange County and surrounding areas. Faced with figures from an appraiser, the mortgage company will usually cancel 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: