Let Premier Appraisal of SoCal help you determine if you can eliminate your PMI
A 20% down payment is usually the standard when getting a mortgage. Considering the risk for the lender is often only the remainder between the home value and the sum due on the loan, the 20% supplies a nice buffer against the charges of foreclosure, reselling the home, and regular value changesin the event a borrower doesn't pay.
During the recent mortgage boom of the mid 2000s, it was common to see lenders commanding down payments of 10, 5 or sometimes 0 percent. How does a lender endure the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This added plan protects the lender in the event a borrower doesn't pay 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 payment and frequently isn't even tax deductible, PMI can be costly to a borrower. Separate from a piggyback loan where the lender absorbs all the losses, PMI is lucrative for the lender because they obtain the money, and they receive payment if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home buyers avoid bearing the expense of PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Acute home owners can get off the hook sooner than expected. The law promises that, upon request of the home owner, the PMI must be released when the principal amount equals just 80 percent.
It can take countless years to get to the point where the principal is just 20% of the original loan amount, so it's essential to know how your home has grown in value. After all, any appreciation you've obtained over time counts towards removing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Even when nationwide trends hint at decreasing home values, realize that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home may have secured equity before things settled down.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. As appraisers, it's our job to know the market dynamics of our area. At Premier Appraisal of SoCal, we're masters at pinpointing value trends in Mission Viejo, Orange County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will generally drop the PMI with little anxiety. 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: