Let Associate Appraisers of America help you learn if you can cancel your PMI
It's typically known that a 20% down payment is accepted when getting a mortgage. The lender's risk is usually only the remainder between the home value and the sum outstanding on the loan, so the 20% adds a nice buffer against the charges of foreclosure, reselling the home, and natural value variations in the event a purchaser doesn't pay.
Lenders were accepting down payments down to 10, 5 and even 0 percent during the mortgage boom of the last decade. A lender is able to endure the added risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower defaults on the loan and the value of the house is less than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and frequently isn't even tax deductible, PMI is pricey to a borrower. Contradictory to a piggyback loan where the lender absorbs all the damages, PMI is profitable for the lender because they obtain 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 home buyers can refrain from bearing the cost of PMI
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically cease the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law guarantees that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent. So, wise home owners can get off the hook ahead of time.
Since it can take countless years to arrive at the point where the principal is just 20% of the original loan amount, it's important to know how your home has increased in value. After all, any appreciation you've obtained over the years counts towards dismissing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Your neighborhood may not be adopting the national trends and/or your home might have secured equity before things settled down, so even when nationwide trends predict falling home values, you should realize that real estate is local.
The hardest thing for most home owners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can certainly help. As appraisers, it's our job to keep up with the market dynamics of our area. At Associate Appraisers of America, we know when property values have risen or declined. We're experts at pinpointing value trends in Seal Beach, Orange County and surrounding areas. Faced with data from an appraiser, the mortgage company will often do away with the PMI with little trouble. At which time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: