Have equity in your home? Want a lower payment? An appraisal from Premier Appraisal of SoCal can help you get rid of your PMI.
A 20% down payment is usually accepted when getting a mortgage. Since the liability for the lender is generally only the difference between the home value and the sum remaining on the loan, the 20% provides a nice buffer against the charges of foreclosure, selling the home again, and typical value variationsin the event a purchaser is unable to pay.
The market was accepting down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender endure the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower is unable to pay on the loan and the market price of the home is less than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and generally isn't even tax deductible, PMI can be pricey to a borrower. It's favorable for the lender because they obtain the money, and they get paid if the borrower is unable to pay, unlike a piggyback loan where the lender consumes all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homeowners refrain from paying PMI?
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law guarantees that, upon request of the home owner, the PMI must be released when the principal amount equals just 80 percent. So, wise home owners can get off the hook sooner than expected.
It can take many years to reach the point where the principal is only 20% of the initial loan amount, so it's necessary to know how your home has increased in value. After all, every bit of appreciation you've gained over time counts towards removing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Despite the fact that nationwide trends signify falling home values, realize that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home may have acquired equity before things calmed down.
The difficult thing for most homeowners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can surely help. It's an appraiser's job to understand the market dynamics of their area. At Premier Appraisal of SoCal, we know when property values have risen or declined. We're experts at recognizing value trends in Mission Viejo, Orange County and surrounding areas. Faced with data from an appraiser, the mortgage company will usually drop the PMI with little anxiety. At that time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: