Let Associate Appraisers of America help you discover if you can get rid of your PMI
When purchasing a home, a 20% down payment is typically the standard. Because the liability for the lender is usually only the difference between the home value and the sum outstanding on the loan, the 20% provides a nice buffer against the charges of foreclosure, selling the home again, and natural value changesin the event a purchaser doesn't pay.
Lenders were taking down payments as low as 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. How does a lender manage the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplemental plan guards the lender in the event a borrower defaults on the loan and the worth of the house is less than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and often isn't even tax deductible, PMI is costly to a borrower. It's favorable for the lender because they secure the money, and they get paid if the borrower defaults, contradictory to a piggyback loan where the lender takes in all the costs.
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 nearly all loans lenders are forced to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Keen home owners can get off the hook a little early. The law pledges that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent.
It can take countless years to arrive at the point where the principal is just 20% of the original 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 pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not be reflecting the national trends and/or your home might have acquired equity before things cooled off, so even when nationwide trends hint at plunging home values, you should understand that real estate is local.
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. As appraisers, it's our job to recognize the market dynamics of our area. At Associate Appraisers of America, we're masters at identifying value trends in Seal Beach, Orange 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 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: