Have equity in your home? Want a lower payment? An appraisal from Associate Appraisers of America can help you get rid of your PMI.
A 20% down payment is typically accepted when purchasing a home. The lender's liability is often only the remainder between the home value and the sum remaining on the loan, so the 20% adds a nice buffer against the costs of foreclosure, selling the home again, and typical value variations in the event a purchaser is unable to pay.
Lenders were taking down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the added risk of the low down payment with Private Mortgage Insurance or PMI. This supplemental plan protects the lender in case a borrower is unable to pay on the loan and the value of the house is less than the loan balance.
PMI can be expensive to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and often isn't even tax deductible. Separate from a piggyback loan where the lender consumes all the deficits, PMI is favorable for the lender because they collect the money, and they get paid 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 refrain from bearing the expense of PMI?
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Savvy homeowners can get off the hook a little early. The law promises that, at the request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent.
It can take many years to arrive at the point where the principal is just 20% of the original loan amount, so it's crucial to know how your home has appreciated in value. After all, all of the appreciation you've gained 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 might not be following the national trends and/or your home might have gained equity before things simmered down, so even when nationwide trends hint at plummeting home values, you should realize that real estate is local.
The hardest thing for almost all home owners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. As appraisers, it's our job to understand the market dynamics of our area. At Associate Appraisers of America, we know when property values have risen or declined. We're masters at identifying value trends in Seal Beach, Orange County and surrounding areas. Faced with data from an appraiser, the mortgage company will generally drop the PMI with little effort. At which 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: