Have equity in your home? Want a lower payment? An appraisal from All City Appraisal can help you get rid of your PMI.
A 20% down payment is typically the standard when purchasing a home. Because the liability for the lender is generally only the remainder between the home value and the amount due on the loan, the 20% supplies a nice buffer against the costs of foreclosure, selling the home again, and regular value variationsin the event a purchaser is unable to pay.
Lenders were accepting down payments as low as 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender endure the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplementary plan protects the lender if a borrower defaults on the loan and the value of the property is lower than what the borrower still owes on the loan.
PMI can be costly to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible. Opposite from a piggyback loan where the lender takes in all the damages, PMI is advantageous for the lender because they collect the money, and they receive payment 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 a homeowner avoid paying PMI?
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Savvy homeowners can get off the hook beforehand. The law states that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent.
Because it can take many years to get to the point where the principal is only 20% of the original loan amount, it's crucial to know how your home has grown in value. After all, all of the appreciation you've acquired over the years counts towards dismissing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Despite the fact that nationwide trends signify declining home values, understand that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home may have secured equity before things cooled off.
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 difficult thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At All City Appraisal, we're masters at analyzing 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 usually remove the PMI with little trouble. At that time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: