Appraisal-One can help you remove your Private Mortgage Insurance
A 20% down payment is typically the standard when purchasing a home. Since the liability for the lender is oftentimes only the remainder between the home value and the amount due on the loan, the 20% adds a nice cushion against the costs of foreclosure, reselling the home, and typical value changeson the chance that a borrower is unable to pay.
The market was working with down payments as low as 10, 5 and even 0 percent during the mortgage boom of the last decade. How does a lender manage the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower is unable to pay on the loan and the market price of the property is less than the loan balance.
PMI can be expensive to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and frequently isn't even tax deductible. Different from a piggyback loan where the lender takes in all the losses, PMI is beneficial for the lender because they collect the money, and they get paid if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homebuyers 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 primary loan amount. The law guarantees that, at the request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent. So, wise home owners can get off the hook sooner than expected.
Considering it can take countless years to reach the point where the principal is only 20% of the original amount borrowed, it's important to know how your home has appreciated in value. After all, any appreciation you've obtained over time counts towards removing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Even when nationwide trends forecast decreasing home values, be aware that real estate is local. Your neighborhood might not be heeding the national trends and/or your home could have secured equity before things simmered down.
The hardest thing for almost all homeowners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can surely help. As appraisers, it's our job to know the market dynamics of our area. At Appraisal-One, we know when property values have risen or declined. We're masters at determining value trends in Huntington Beach, Orange County and surrounding areas. When faced with figures from an appraiser, the mortgage company will usually remove the PMI with little effort. At that 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: