All City Appraisal can help you remove your Private Mortgage Insurance
It's largely known that a 20% down payment is common when buying a house. The lender's liability is oftentimes only the remainder between the home value and the amount due on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and typical value fluctuations in the event a borrower is unable to pay.
Lenders were working with down payments as low as 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender manage the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This supplementary plan takes care of the lender if a borrower defaults on the loan and the worth of the property is less than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and frequently isn't even tax deductible, PMI can be pricey to a borrower. It's advantageous for the lender because they secure the money, and they get paid if the borrower defaults, opposite from a piggyback loan where the lender absorbs all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homebuyer prevent bearing the cost of PMI?
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law stipulates that, upon request of the home owner, the PMI must be released when the principal amount equals only 80 percent. So, smart homeowners can get off the hook a little earlier.
Considering it can take countless years to get to the point where the principal is just 20% of the initial amount borrowed, it's crucial to know how your home has grown in value. After all, all of the appreciation you've obtained over time counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Despite the fact that nationwide trends forecast plummeting home values, be aware that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home might have acquired equity before things settled down.
The toughest thing for almost all home owners to understand 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 know when property values have risen or declined. We're experts at analyzing value trends in Woodland Hills, Los Angeles County and surrounding areas. Faced with data from an appraiser, the mortgage company will usually 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: