Let All City Appraisal help you determine if you can cancel your PMI
When buying a house, a 20% down payment is typically the standard. The lender's liability is usually only the difference between the home value and the amount outstanding on the loan, so the 20% adds a nice buffer against the costs of foreclosure, selling the home again, and typical value changes on the chance that a borrower is unable to pay.
Lenders were working with down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the added risk of the reduced down payment with Private Mortgage Insurance or PMI. This added policy protects the lender in case a borrower is unable to pay on the loan and the market price of the home is less than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI is pricey to a borrower. Unlike a piggyback loan where the lender takes in all the deficits, PMI is lucrative for the lender because they obtain 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 homebuyers can refrain from paying PMI
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically cease the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law stipulates that, upon request of the homeowner, the PMI must be released when the principal amount equals just 80 percent. So, acute homeowners can get off the hook a little early.
Because it can take countless years to reach the point where the principal is just 20% of the initial loan amount, it's important to know how your home has appreciated in value. After all, every bit of appreciation you've gained over the years counts towards abolishing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Despite the fact that nationwide trends indicate declining home values, understand that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home may have secured equity before things calmed down.
The toughest thing for almost all homeowners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can certainly help. It's an appraiser's job to understand the market dynamics of their 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. Faced with information from an appraiser, the mortgage company will often cancel the PMI with little effort. At that time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: