Let Appraisal-One help you figure out if you can cancel your PMI
A 20% down payment is typically accepted when purchasing a home. Considering the risk for the lender is generally only the difference between the home value and the sum remaining on the loan, the 20% supplies a nice buffer against the expenses of foreclosure, selling the home again, and natural value variationson the chance that a borrower is unable to pay.
Banks were accepting down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the additional risk of the small down payment with Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower doesn't pay on the loan and the worth of the house is less than what is owed on the loan.
PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and often isn't even tax deductible. Contradictory to a piggyback loan where the lender takes in all the deficits, PMI is profitable for the lender because they collect the money, and they receive payment 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 can buyers prevent bearing the cost of PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Keen homeowners can get off the hook a little early. The law pledges that, upon request of the home owner, the PMI must be dropped when the principal amount reaches only 80 percent.
Since it can take many years to reach the point where the principal is just 20% of the initial amount borrowed, it's necessary to know how your home has increased in value. After all, every bit of appreciation you've obtained over time counts towards removing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Despite the fact that nationwide trends indicate declining home values, be aware that real estate is local. Your neighborhood may not be adopting the national trends and/or your home might have secured equity before things calmed down.
The difficult thing for almost all home owners to know 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 understand the market dynamics of our area. At Appraisal-One, we know when property values have risen or declined. We're experts at analyzing value trends in Huntington Beach, Orange County and surrounding areas. When faced with data from an appraiser, the mortgage company will most often do away with the PMI with little anxiety. At which 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: