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Let Abandy & Associates Appraisal Services help you learn if you can eliminate your PMI
It's generally inferred that a 20% down payment is common when buying a house.
The lender's only liability is often just the difference between the home value and the amount remaining on the loan, so the 20% supplies a nice cushion against the costs of foreclosure, reselling the home, and typical value changes in the event a borrower doesn't pay.
During the recent mortgage boom of the last decade, it became widespread to see lenders reducing down payments to 10, 5, 3 or even 0 percent.
How does a lender handle the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI.
PMI guards the lender in case a borrower doesn't pay on the loan and the value 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 frequently isn't even tax deductible.
It's money-making for the lender because they secure the money, and they get paid if the borrower doesn't pay, separate from a piggyback loan where the lender absorbs all the deficits.
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Is PMI a lineitem in your monthly house payment? Call Abandy & Associates Appraisal Services today at (909) 393-7049 or send us an e-mail. Documentation of your home's present value could save you thousands.
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How can home owners refrain from bearing the expense of PMI?
As a result of The Homeowners Protection Act of 1998, lenders are required to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the original loan amount on nearly all loans.
Acute home owners can get off the hook a little early. The law pledges that, upon request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent.
It can take a significant number of years to get to the point where the principal is only 80% of the initial amount of the loan, so it's crucial to know how your California home has grown in value.
After all, any appreciation you've acquired over time counts towards abolishing PMI. So why should you pay it after your loan balance has dropped below the 80% mark?
Your neighborhood may not follow national trends and/or your home may have acquired equity before things cooled off. So even when nationwide trends predict a reduction in home values, you should understand that real estate is local.
An accredited, California licensed real estate appraiser can help home owners figure out 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 understand the market dynamics of our area.
At Abandy & Associates Appraisal Services, we know when property values have risen or declined. We're experts at recognizing value trends in Chino Hills, San Bernardino County, and surrounding areas.
When faced with data from an appraiser, the mortgage company will most often remove the PMI with little anxiety. At which time, the homeowner can delight in the savings from that point on.
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The savings from getting rid of your PMI pays for the appraisal in no time. Abandy & Associates Appraisal Services is in the business of tracking value trends in Chino Hills and San Bernardino County. Contact us today.
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Want to learn more about PMI and the Homeowners Protection Act? Click this link:
Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year
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