All City Appraisal can help you remove your Private Mortgage Insurance
When purchasing a home, a 20% down payment is usually the standard. The lender's liability is generally only the difference between the home value and the sum due on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, selling the home again, and regular value fluctuations in the event a purchaser defaults.
During the recent mortgage boom of the last decade, it was common to see lenders commanding down payments of 10, 5 or even 0 percent. How does a lender manage the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This supplementary policy guards the lender in case a borrower is unable to pay on the loan and the market price of the property is lower than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and oftentimes isn't even tax deductible, PMI can be pricey to a borrower. It's beneficial for the lender because they secure the money, and they receive payment if the borrower doesn't pay, unlike a piggyback loan where the lender takes in all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home owners can keep from paying PMI
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Wise home owners can get off the hook sooner than expected. The law designates that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent.
It can take many years to get to the point where the principal is just 20% of the initial loan amount, so it's important to know how your home has grown in value. After all, every bit of appreciation you've gained over time counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Your neighborhood might not be adhering to the national trends and/or your home could have acquired equity before things calmed down, so even when nationwide trends predict plummeting home values, you should realize that real estate is local.
An accredited, 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. It is an appraiser's job to keep up with the market dynamics of their area. At All City Appraisal, we're masters at identifying value trends in Woodland Hills, Los Angeles County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will often drop the PMI with little anxiety. At that time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: