The Appraisal Firm can help you remove your Private Mortgage Insurance
When getting a mortgage, a 20% down payment is usually the standard. Since the liability for the lender is oftentimes only the difference between the home value and the sum remaining on the loan, the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and typical value fluctuationsin the event a borrower is unable to pay.
During the recent mortgage boom of the last decade, it became common to see lenders requiring down payments of 10, 5 or often 0 percent. How does a lender handle the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower doesn't pay on the loan and the value of the property is lower than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and oftentimes isn't even tax deductible, PMI can be expensive to a borrower. Contradictory to a piggyback loan where the lender consumes all the damages, PMI is favorable for the lender because they secure the money, and they receive payment 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 homeowner 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 initial loan amount. Keen homeowners can get off the hook a little early. The law stipulates that, upon request of the homeowner, the PMI must be released when the principal amount equals just 80 percent.
It can take countless years to reach the point where the principal is only 20% of the initial loan amount, so it's crucial to know how your home has appreciated in value. After all, every bit of appreciation you've accomplished over the years counts towards removing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Despite the fact that nationwide trends predict declining home values, realize that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home could have acquired equity before things simmered down.
A certified, 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. It is an appraiser's job to know the market dynamics of their area. At The Appraisal Firm, we know when property values have risen or declined. We're experts at pinpointing value trends in Escondido, San Diego County and surrounding areas. Faced with figures from an appraiser, the mortgage company will generally eliminate the PMI with little anxiety. At that 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: