All City Appraisal can help you remove your Private Mortgage Insurance
A 20% down payment is typically the standard when purchasing a home. Since the risk for the lender is often only the difference between the home value and the sum outstanding on the loan, the 20% supplies a nice cushion against the expenses of foreclosure, selling the home again, and typical value variationson the chance that a borrower is unable to pay.
During the recent mortgage upturn of the last decade, it was common to see lenders commanding down payments of 10, 5 or sometimes 0 percent. A lender is able to handle the added risk of the low down payment with Private Mortgage Insurance or PMI. This added policy guards the lender if a borrower is unable to pay on the loan and the worth of the property is lower than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and many times isn't even tax deductible, PMI can be costly to a borrower. It's beneficial for the lender because they acquire the money, and they get paid if the borrower doesn't pay, contradictory to 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 buyers can keep from paying PMI
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Keen homeowners can get off the hook beforehand. The law stipulates that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent.
It can take many years to reach the point where the principal is only 20% of the initial loan amount, so it's important to know how your home has increased in value. After all, every bit of appreciation you've obtained over time counts towards removing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Your neighborhood may not be following the national trends and/or your home might have secured equity before things settled down, so even when nationwide trends indicate plunging home values, you should realize that real estate is local.
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 tough thing to know. It is 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 analyzing value trends in Woodland Hills, Los Angeles County and surrounding areas. Faced with figures from an appraiser, the mortgage company will often cancel the PMI with little trouble. At which 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: