All City Appraisal can help you remove your Private Mortgage Insurance
It's widely known that a 20% down payment is the standard when getting a mortgage. The lender's risk is usually only the difference between the home value and the sum due on the loan, so the 20% adds a nice buffer against the costs of foreclosure, selling the home again, and regular value variations on the chance that a borrower defaults.
During the recent mortgage boom of the last decade, it was customary to see lenders requiring down payments of 10, 5 or sometimes 0 percent. A lender is able to handle the increased risk of the low down payment with Private Mortgage Insurance or PMI. This supplementary plan protects the lender in the event a borrower is unable to pay on the loan and the market price of the property is lower 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 many times isn't even tax deductible. It's money-making for the lender because they acquire the money, and they receive payment if the borrower doesn't pay, different from a piggyback loan where the lender takes in 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 home owners avoid bearing the cost of PMI?
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law promises that, upon request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent. So, acute homeowners can get off the hook a little early.
Since it can take many years to get to the point where the principal is only 20% of the original loan amount, it's crucial to know how your home has increased in value. After all, any appreciation you've obtained over time counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% mark? Even when nationwide trends predict plunging home values, realize that real estate is local. Your neighborhood might not be minding the national trends and/or your home may have acquired equity before things cooled off.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At All City Appraisal, we know when property values have risen or declined. We're experts at determining value trends in Woodland Hills, Los Angeles County and surrounding areas. When faced with figures from an appraiser, the mortgage company will generally remove the PMI with little trouble. At that 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: