Let Abandy & Associates Appraisal Services help you determine if you can cancel your PMI
A 20% down payment is typically the standard when getting a mortgage. Because the risk for the lender is oftentimes only the remainder between the home value and the sum remaining on the loan, the 20% provides a nice cushion against the charges of foreclosure, reselling the home, and regular value fluctuationsin the event a purchaser is unable to pay.
During the recent mortgage boom of the last decade, it was customary to see lenders taking down payments of 10, 5 or often 0 percent. How does a lender handle the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower defaults on the loan and the worth of the house is lower than what is owed on the loan.
PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and many times isn't even tax deductible. Different from a piggyback loan where the lender takes in all the losses, PMI is favorable for the lender because they secure the money, and they get the money 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 home buyers avoid bearing the cost of PMI?
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law promises that, at the request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent. So, acute home owners can get off the hook a little earlier.
Since it can take countless years to get to the point where the principal is just 20% of the original amount borrowed, it's necessary to know how your home has grown in value. After all, every bit of appreciation you've gained over time counts towards removing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Your neighborhood might not be minding the national trends and/or your home might have secured equity before things cooled off, so even when nationwide trends indicate plunging 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 hard thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At Abandy & Associates Appraisal Services, we're experts at pinpointing value trends in Chino Hills, San Bernardino County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will usually drop the PMI with little effort. At that time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: