Associate Appraisers of America can help you remove your Private Mortgage Insurance
A 20% down payment is usually accepted when buying a house. Considering the liability for the lender is generally only the remainder between the home value and the amount remaining on the loan, the 20% supplies a nice cushion against the costs of foreclosure, reselling the home, and regular value fluctuationsin the event a purchaser defaults.
During the recent mortgage upturn of the mid 2000s, it was common to see lenders requiring down payments of 10, 5 or often 0 percent. How does a lender endure the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI protects the lender if a borrower defaults on the loan and the worth of the house is lower than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and generally isn't even tax deductible, PMI can be expensive to a borrower. Separate from a piggyback loan where the lender takes in all the losses, PMI is lucrative for the lender because they secure the money, and they get the money 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 a buyer refrain from paying PMI?
The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law states that, at the request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent. So, smart homeowners can get off the hook a little early.
It can take many years to reach the point where the principal is just 20% of the original loan amount, so it's important to know how your home has grown in value. After all, any appreciation you've acquired over the years counts towards abolishing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Despite the fact that nationwide trends indicate decreasing home values, understand that real estate is local. Your neighborhood might not be heeding the national trends and/or your home could have gained equity before things calmed down.
The toughest thing for many homeowners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can certainly help. It's an appraiser's job to understand the market dynamics of their 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. When faced with figures from an appraiser, the mortgage company will often do away with the PMI with little effort. 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: