Associate Appraisers of America can help you remove your Private Mortgage Insurance
A 20% down payment is usually the standard when purchasing a home. Because the risk for the lender is usually only the remainder between the home value and the amount outstanding on the loan, the 20% supplies a nice cushion against the charges of foreclosure, reselling the home, and typical value fluctuationson the chance that a purchaser is unable to pay.
Banks were taking down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender manage the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI 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 is owed on the loan.
PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and generally isn't even tax deductible. It's money-making for the lender because they collect the money, and they get the money if the borrower is unable to pay, separate from 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 homebuyers keep from paying PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Keen home owners can get off the hook a little early. The law promises that, upon request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent.
It can take many years to get to the point where the principal is only 20% of the initial loan amount, so it's important to know how your home has appreciated in value. After all, any appreciation you've gained over the years counts towards removing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Even when nationwide trends indicate decreasing home values, realize that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home may have secured equity before things calmed down.
The hardest thing for many homeowners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can certainly help. It is an appraiser's job to recognize the market dynamics of their area. At Associate Appraisers of America, we know when property values have risen or declined. We're masters at determining value trends in Seal Beach, Orange County and surrounding areas. When faced with data from an appraiser, the mortgage company will most often remove the PMI with little effort. At which 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: