All City Appraisal can help you remove your Private Mortgage Insurance
It's generally inferred that a 20% down payment is accepted when purchasing a home. The lender's liability is often only the remainder between the home value and the sum outstanding on the loan, so the 20% provides a nice buffer against the costs of foreclosure, selling the home again, and natural value variations in the event a purchaser defaults.
During the recent mortgage upturn of the last decade, it became common to see lenders commanding down payments of 10, 5 or even 0 percent. How does a lender manage the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower defaults on the loan and the market price of the house is lower than the balance of the loan.
PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and often isn't even tax deductible. Opposite from a piggyback loan where the lender absorbs all the losses, PMI is beneficial for the lender because they obtain the money, and they get the money if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home owner prevent bearing the expense of PMI?
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Savvy home owners can get off the hook a little earlier. The law states that, at the request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent.
It can take countless years to arrive at the point where the principal is only 20% of the initial amount of the loan, so it's necessary to know how your home has grown in value. After all, any appreciation you've accomplished over the years counts towards removing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood might not be following the national trends and/or your home may have gained equity before things simmered down, so even when nationwide trends predict plummeting home values, you should understand that real estate is local.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. It is an appraiser's job to keep up with the market dynamics of their area. At All City Appraisal, we know when property values have risen or declined. We're masters at recognizing value trends in Woodland Hills, Los Angeles County and surrounding areas. When faced with information from an appraiser, the mortgage company will generally eliminate the PMI with little effort. At which time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: