Have equity in your home? Want a lower payment? An appraisal from Abandy & Associates Appraisal Services can help you get rid of your PMI.
When buying a house, a 20% down payment is usually the standard. The lender's liability is often only the difference between the home value and the sum outstanding on the loan, so the 20% provides a nice cushion against the expenses of foreclosure, selling the home again, and typical value fluctuations on the chance that a purchaser is unable to pay.
During the recent mortgage upturn of the last decade, it was common to see lenders requiring down payments of 10, 5 or often 0 percent. A lender is able to manage the increased risk of the low down payment with Private Mortgage Insurance or PMI. This supplementary plan protects the lender if 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 oftentimes isn't even tax deductible, PMI can be pricey to a borrower. It's profitable for the lender because they obtain the money, and they receive payment if the borrower is unable to pay, unlike a piggyback loan where the lender absorbs all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homeowners avoid bearing the expense of PMI?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Wise home owners can get off the hook a little earlier. The law guarantees that, at the request of the home owner, the PMI must be dropped when the principal amount equals just 80 percent.
Because it can take countless years to get to the point where the principal is just 20% of the initial amount borrowed, it's necessary to know how your home has appreciated in value. After all, all of the appreciation you've obtained over the years counts towards abolishing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood might not be following the national trends and/or your home might have secured equity before things simmered down, so even when nationwide trends signify falling home values, you should understand that real estate is local.
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 difficult thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At Abandy & Associates Appraisal Services, we know when property values have risen or declined. We're experts at determining value trends in Chino Hills, San Bernardino County and surrounding areas. Faced with information from an appraiser, the mortgage company will generally 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: