The Appraisal Firm can help you remove your Private Mortgage Insurance
When buying a house, a 20% down payment is usually the standard. The lender's liability is generally only the difference between the home value and the sum remaining on the loan, so the 20% supplies a nice buffer against the charges of foreclosure, reselling the home, and regular value fluctuations on the chance that a borrower defaults.
The market was accepting down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. This additional policy takes care of the lender in the event a borrower defaults on the loan and the worth of the property is less than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and often isn't even tax deductible, PMI can be expensive to a borrower. It's profitable 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 losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homeowners can keep from bearing the expense of PMI
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Smart homeowners can get off the hook sooner than expected. The law pledges that, upon request of the home owner, the PMI must be released when the principal amount reaches only 80 percent.
It can take many years to arrive at the point where the principal is only 20% of the initial amount borrowed, so it's crucial to know how your home has appreciated in value. After all, any appreciation you've gained over the years counts towards abolishing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Despite the fact that nationwide trends hint at declining home values, be aware that real estate is local. Your neighborhood may not be following the national trends and/or your home might have gained equity before things cooled off.
The difficult thing for many homeowners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can definitely help. As appraisers, it's our job to keep up with the market dynamics of our area. At The Appraisal Firm, we know when property values have risen or declined. We're experts at analyzing value trends in Escondido, San Diego County and surrounding areas. Faced with data from an appraiser, the mortgage company will generally remove the PMI with little anxiety. At which time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: