Premier Appraisal of SoCal can help you remove your Private Mortgage Insurance
It's largely understood that a 20% down payment is the standard when purchasing a home. The lender's risk is oftentimes only the remainder between the home value and the amount due on the loan, so the 20% supplies a nice buffer against the costs of foreclosure, selling the home again, and typical value variations in the event a purchaser doesn't pay.
The market was accepting down payments as low as 10, 5 and often 0 percent during the mortgage boom of the last decade. A lender is able to handle the added risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI covers the lender if a borrower is unable to pay on the loan and the worth of the house 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 oftentimes isn't even tax deductible. It's favorable for the lender because they secure the money, and they receive payment if the borrower doesn't pay, opposite 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 a buyer avoid paying PMI?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Acute home owners can get off the hook sooner than expected. The law pledges that, at the request of the homeowner, the PMI must be released when the principal amount reaches 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 necessary to know how your home has appreciated in value. After all, every bit of appreciation you've accomplished over the years counts towards dismissing PMI. So why pay it after your loan balance has fallen below the 80% mark? Even when nationwide trends predict decreasing home values, understand that real estate is local. Your neighborhood might not be minding the national trends and/or your home may have gained equity before things cooled off.
An accredited, 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 know the market dynamics of our area. At Premier Appraisal of SoCal, we know when property values have risen or declined. We're masters at recognizing value trends in Mission Viejo, Orange County and surrounding areas. When faced with information from an appraiser, the mortgage company will often eliminate the PMI with little trouble. At which time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: