Associate Appraisers of America can help you remove your Private Mortgage Insurance
A 20% down payment is usually accepted when purchasing a home. The lender's liability is generally only the difference between the home value and the amount due on the loan, so the 20% provides a nice cushion against the costs of foreclosure, selling the home again, and natural value variations in the event a borrower doesn't pay.
The market was taking down payments as low as 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender manage the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplementary policy protects the lender in case a borrower defaults on the loan and the value of the property is less 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 rolled into the mortgage monthly payment and many times isn't even tax deductible. Unlike a piggyback loan where the lender consumes all the losses, PMI is money-making for the lender because they acquire the money, and they get paid if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home buyer keep from bearing the expense of PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically stop the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law guarantees that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, wise homeowners can get off the hook a little early.
It can take many years to reach the point where the principal is only 20% of the initial amount borrowed, so it's crucial to know how your home has grown in value. After all, any appreciation you've achieved over the years counts towards dismissing PMI. So why pay it after your loan balance has fallen below the 80% mark? Despite the fact that nationwide trends predict plunging home values, realize that real estate is local. Your neighborhood might not be following the national trends and/or your home may have gained equity before things calmed down.
A certified, 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's 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 recognizing value trends in Seal Beach, Orange County and surrounding areas. When faced with data from an appraiser, the mortgage company will usually 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: