CALI Real Estate Appraisals can help you remove your Private Mortgage Insurance
It's typically inferred that a 20% down payment is the standard when getting a mortgage. Since the liability for the lender is generally only the remainder between the home value and the sum due on the loan, the 20% adds a nice buffer against the costs of foreclosure, selling the home again, and typical value variationson the chance that a purchaser is unable to pay.
The market was accepting down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender manage the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI protects the lender if a borrower defaults on the loan and the worth of the house 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 monthly payment and many times isn't even tax deductible, PMI is costly to a borrower. Different from a piggyback loan where the lender absorbs all the costs, PMI is favorable for the lender because they obtain 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 buyer keep from bearing the expense of PMI?
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically cease 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 homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, keen homeowners can get off the hook a little earlier.
It can take many years to get to the point where the principal is just 20% of the initial amount borrowed, so it's necessary to know how your home has grown in value. After all, every bit of appreciation you've gained over the years counts towards dismissing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood might not be reflecting the national trends and/or your home might have acquired equity before things settled down, so even when nationwide trends signify plummeting home values, you should understand that real estate is local.
The toughest thing for most homeowners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can surely help. As appraisers, it's our job to know the market dynamics of our area. At CALI Real Estate Appraisals, we know when property values have risen or declined. We're experts at identifying value trends in Eastvale, Riverside County and surrounding areas. Faced with data from an appraiser, the mortgage company will often drop the PMI with little effort. At that time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: