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 buying a house. The lender's liability is often only the remainder between the home value and the amount due on the loan, so the 20% adds a nice cushion against the costs of foreclosure, reselling the home, and typical value changes in the event a borrower is unable to pay.
During the recent mortgage upturn of the last decade, it became common to see lenders requiring down payments of 10, 5 or sometimes 0 percent. A lender is able to handle the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. This supplementary policy guards the lender in case a borrower defaults on the loan and the market price of the house is less than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and generally isn't even tax deductible, PMI can be expensive to a borrower. It's advantageous for the lender because they acquire the money, and they get the money if the borrower doesn't pay, different from a piggyback loan where the lender consumes all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homebuyers avoid bearing the cost of PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law stipulates that, at the request of the home owner, the PMI must be dropped when the principal amount reaches only 80 percent. So, wise homeowners can get off the hook sooner than expected.
Since it can take many years to reach the point where the principal is only 20% of the original amount of the loan, it's necessary to know how your home has appreciated in value. After all, any appreciation you've gained over the years counts towards abolishing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not be reflecting the national trends and/or your home could have acquired equity before things simmered down, so even when nationwide trends signify decreasing home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a tough thing to know. It's an appraiser's job to understand the market dynamics of their area. At Associate Appraisers of America, we're experts at pinpointing value trends in Seal Beach, Orange County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will usually do away with the PMI with little trouble. At which time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: