Associate Appraisers of America can help you remove your Private Mortgage Insurance
It's largely known that a 20% down payment is the standard when buying a house. Because the liability for the lender is generally only the remainder between the home value and the amount due on the loan, the 20% adds a nice cushion against the charges of foreclosure, reselling the home, and regular value changesin the event a borrower doesn't pay.
The market was working with down payments down to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. A lender is able to endure the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower doesn't pay on the loan and the market price of the property is lower than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible, PMI is pricey to a borrower. Separate from a piggyback loan where the lender absorbs all the deficits, PMI is profitable for the lender because they collect the money, and they get paid 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 homeowners can avoid bearing the expense of PMI
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law states that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent. So, keen homeowners can get off the hook a little early.
Because it can take countless years to get to the point where the principal is only 20% of the initial loan amount, it's crucial to know how your home has appreciated in value. After all, any appreciation you've obtained over the years counts towards removing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Despite the fact that nationwide trends forecast plummeting home values, be aware that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home might have gained equity before things simmered down.
The difficult thing for many homeowners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can surely help. It's an appraiser's job to know the market dynamics of their area. At Associate Appraisers of America, we know when property values have risen or declined. We're masters at pinpointing value trends in Seal Beach, Orange County and surrounding areas. Faced with figures from an appraiser, the mortgage company will often eliminate the PMI with little trouble. At that 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: