All City Appraisal can help you remove your Private Mortgage Insurance
A 20% down payment is typically the standard when purchasing a home. The lender's liability is usually only the remainder between the home value and the sum outstanding on the loan, so the 20% provides a nice cushion against the charges of foreclosure, selling the home again, and regular value fluctuations in the event a borrower defaults.
During the recent mortgage upturn of the mid 2000s, it became common to see lenders commanding down payments of 10, 5 or often 0 percent. How does a lender manage the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower doesn't pay on the loan and the worth of the property is less than what the borrower still owes on the loan.
PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and often isn't even tax deductible. It's lucrative for the lender because they acquire the money, and they get paid if the borrower is unable to pay, different from a piggyback loan where the lender consumes all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homeowner keep from bearing the cost of PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Keen homeowners can get off the hook ahead of time. The law pledges that, upon request of the homeowner, the PMI must be released 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 original amount of the loan, so it's crucial to know how your home has increased in value. After all, any appreciation you've gained over time counts towards dismissing 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 hint at plummeting home values, be aware that real estate is local. Your neighborhood may not be following the national trends and/or your home could have gained equity before things cooled off.
An accredited, licensed real estate appraiser can help home owners 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 recognize the market dynamics of their area. At All City Appraisal, we're experts at recognizing value trends in Woodland Hills, Los Angeles County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will most often eliminate the PMI with little trouble. At that time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: