Abandy & Associates Appraisal Services can help you remove your Private Mortgage Insurance
A 20% down payment is typically the standard when purchasing a home. Since the liability for the lender is often only the remainder between the home value and the sum remaining on the loan, the 20% provides a nice cushion against the costs of foreclosure, selling the home again, and typical value fluctuationson the chance that a borrower is unable to pay.
The market was working with down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to endure the added risk of the low down payment with Private Mortgage Insurance or PMI. This added policy takes care of the lender in the event a borrower is unable to pay on the loan and the worth of the home is lower than the loan balance.
PMI can be expensive to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and generally isn't even tax deductible. Contradictory to a piggyback loan where the lender takes in all the losses, PMI is lucrative for the lender because they secure the money, and they get the money 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 can homebuyers refrain from paying PMI?
The Homeowners Protection Act of 1998 requires 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. Savvy homeowners can get off the hook a little early. The law designates that, at the request of the homeowner, the PMI must be released when the principal amount equals just 80 percent.
Since it can take many years to get to the point where the principal is only 20% of the initial amount borrowed, it's essential to know how your home has increased in value. After all, any appreciation you've acquired over time counts towards removing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not be reflecting the national trends and/or your home might have acquired equity before things simmered down, so even when nationwide trends hint at decreasing home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. It is an appraiser's job to understand the market dynamics of their area. At Abandy & Associates Appraisal Services, we're experts at identifying value trends in Chino Hills, San Bernardino County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will often eliminate the PMI with little effort. 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: