Let Associate Appraisers of America help you discover if you can eliminate your PMI
A 20% down payment is typically the standard when purchasing a home. Considering the liability for the lender is often only the remainder between the home value and the amount outstanding on the loan, the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and regular value fluctuationson the chance that a purchaser doesn't pay.
The market was 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 manage the additional risk of the low down payment with Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower is unable to pay on the loan and the worth of the property is less than what is owed on the loan.
PMI can be expensive to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and frequently isn't even tax deductible. Different from a piggyback loan where the lender takes in all the deficits, PMI is money-making for the lender because they acquire the money, and they get paid if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homeowners keep from bearing the cost of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law promises that, at the request of the homeowner, the PMI must be released when the principal amount equals just 80 percent. So, wise homeowners can get off the hook ahead of time.
Considering it can take countless years to get to the point where the principal is only 20% of the initial amount of the loan, it's essential to know how your home has grown in value. After all, any appreciation you've accomplished over time counts towards removing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood may not be reflecting the national trends and/or your home could have secured equity before things simmered down, so even when nationwide trends hint at decreasing home values, you should realize that real estate is local.
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 difficult thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At Associate Appraisers of America, we're masters at identifying value trends in Seal Beach, Orange County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will often remove the PMI with little anxiety. At that time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: