Associate Appraisers of America can help you remove your Private Mortgage Insurance
A 20% down payment is typically accepted when buying a house. Since the risk for the lender is generally only the difference between the home value and the amount remaining on the loan, the 20% provides a nice buffer against the costs of foreclosure, selling the home again, and natural value fluctuationson the chance that a borrower defaults.
During the recent mortgage boom of the mid 2000s, it was customary to see lenders requiring down payments of 10, 5 or even 0 percent. How does a lender handle the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower is unable to pay on the loan and the value of the property is less than the balance of the loan.
PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and frequently isn't even tax deductible. It's advantageous for the lender because they secure the money, and they get the money if the borrower is unable to pay, unlike a piggyback loan where the lender consumes all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homeowner avoid bearing the cost of PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically stop the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law guarantees that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent. So, acute homeowners can get off the hook ahead of time.
Because it can take countless years to get to the point where the principal is only 20% of the initial amount borrowed, it's crucial to know how your home has grown in value. After all, any appreciation you've gained over time counts towards dismissing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold? Your neighborhood might not be adhering to the national trends and/or your home may have acquired equity before things simmered down, so even when nationwide trends forecast declining home values, you should understand that real estate is local.
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 definitely help. It is an appraiser's job to keep up with the market dynamics of their area. At Associate Appraisers of America, we know when property values have risen or declined. We're experts at identifying value trends in Seal Beach, Orange County and surrounding areas. When faced with figures from an appraiser, the mortgage company will generally do away with the PMI with little anxiety. At that time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: