Appraisal-One can help you remove your Private Mortgage Insurance
A 20% down payment is usually the standard when buying a house. The lender's risk is oftentimes only the remainder between the home value and the amount outstanding on the loan, so the 20% supplies a nice buffer against the charges of foreclosure, reselling the home, and natural value changes on the chance that a purchaser defaults.
Banks were working with down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the added risk of the small down payment with Private Mortgage Insurance or PMI. This added plan takes care of the lender in case a borrower doesn't pay on the loan and the market price of the home is lower than the balance of the loan.
PMI is costly to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and often isn't even tax deductible. Different from a piggyback loan where the lender absorbs all the damages, PMI is advantageous for the lender because they secure the money, and they receive payment if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can buyers prevent bearing the expense of PMI?
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Keen homeowners can get off the hook beforehand. The law states that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent.
Since it can take many years to get to the point where the principal is only 20% of the initial amount borrowed, it's crucial to know how your home has grown in value. After all, every bit of appreciation you've achieved over the years counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends predict plunging home values, realize that real estate is local. Your neighborhood may not be adopting the national trends and/or your home might have acquired equity before things calmed down.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity rises above 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 Appraisal-One, we're experts at recognizing value trends in Huntington Beach, Orange County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will often eliminate the PMI with little trouble. At that time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: