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 often only the remainder between the home value and the sum remaining on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, selling the home again, and typical value changes in the event a purchaser doesn't pay.
The market was accepting down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender endure the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This supplemental plan guards the lender in the event a borrower defaults on the loan and the market price of the house is lower than what the borrower still owes on the loan.
PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and oftentimes isn't even tax deductible. Contradictory to a piggyback loan where the lender takes in all the damages, PMI is money-making for the lender because they secure the money, and they get paid if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a buyer keep from bearing the expense of PMI?
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Smart home owners can get off the hook ahead of time. The law promises that, at the request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent.
It can take countless years to reach the point where the principal is just 20% of the original amount of the loan, so it's crucial to know how your home has increased in value. After all, all of the appreciation you've achieved over time counts towards removing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Despite the fact that nationwide trends forecast falling home values, understand that real estate is local. Your neighborhood might not be adopting the national trends and/or your home could have secured equity before things cooled off.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At The Appraisal Firm, we know when property values have risen or declined. We're masters at analyzing value trends in Escondido, San Diego County and surrounding areas. Faced with information from an appraiser, the mortgage company will most often eliminate the PMI with little trouble. At that time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: