Have equity in your home? Want a lower payment? An appraisal from Associate Appraisers of America can help you get rid of your PMI.
A 20% down payment is usually the standard when purchasing a home. Since the risk for the lender is generally only the difference between the home value and the amount outstanding on the loan, the 20% adds a nice buffer against the costs of foreclosure, selling the home again, and natural value variationsin the event a borrower is unable to pay.
During the recent mortgage upturn of the mid 2000s, it became customary to see lenders commanding down payments of 10, 5 or even 0 percent. A lender is able to handle the added risk of the reduced down payment with Private Mortgage Insurance or PMI. This additional policy guards the lender if a borrower doesn't pay on the loan and the market price of the property is lower than the balance of the loan.
PMI is costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and many times isn't even tax deductible. Separate from a piggyback loan where the lender consumes all the damages, PMI is beneficial for the lender because they collect the money, and they receive payment 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 homebuyers refrain from bearing the expense of PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Keen home owners can get off the hook ahead of time. The law designates that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent.
Because it can take many years to reach the point where the principal is just 20% of the original loan amount, it's crucial to know how your home has appreciated in value. After all, any appreciation you've gained over time counts towards abolishing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Your neighborhood might not be reflecting the national trends and/or your home could have secured equity before things settled down, so even when nationwide trends signify plummeting home values, you should understand that real estate is local.
The hardest thing for most home owners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. It's an appraiser's job to recognize the market dynamics of their 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. When faced with information from an appraiser, the mortgage company will usually drop the PMI with little anxiety. 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: