Have equity in your home? Want a lower payment? An appraisal from All City Appraisal can help you get rid of your PMI.
When getting a mortgage, a 20% down payment is usually the standard. Considering the liability for the lender is often only the remainder 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 regular value variationsin the event a purchaser is unable to pay.
During the recent mortgage upturn of the last decade, it was common 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. This added plan guards the lender in the event a borrower defaults on the loan and the value of the home is less than what is owed on the loan.
PMI is pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and generally isn't even tax deductible. Unlike a piggyback loan where the lender takes in all the costs, PMI is lucrative for the lender because they acquire the money, and they get the money 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 buyers avoid bearing the cost of PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law states that, at the request of the home owner, the PMI must be dropped when the principal amount reaches only 80 percent. So, keen home owners can get off the hook a little earlier.
Since it can take countless years to arrive at the point where the principal is just 20% of the initial amount of the loan, it's important to know how your home has increased in value. After all, every bit of appreciation you've accomplished over the years counts towards dismissing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Despite the fact that nationwide trends indicate plummeting home values, understand that real estate is local. Your neighborhood might not be adopting the national trends and/or your home might have secured equity before things cooled off.
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 surely help. As appraisers, it's our job to keep up with the market dynamics of our area. At All City Appraisal, we're masters at recognizing value trends in Woodland Hills, Los Angeles 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 usually cancel 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: