Have equity in your home? Want a lower payment? An appraisal from All City Appraisal can help you get rid of your PMI.
When purchasing a home, a 20% down payment is typically the standard. The lender's risk is usually only the remainder between the home value and the amount due on the loan, so the 20% supplies a nice cushion against the expenses of foreclosure, reselling the home, and regular value fluctuations on the chance that a borrower doesn't pay.
The market was accepting down payments down to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. How does a lender manage the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplemental plan takes care of the lender in the event a borrower defaults on the loan and the worth of the house is lower than the loan balance.
PMI can be pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and many times isn't even tax deductible. It's beneficial for the lender because they secure the money, and they get the money if the borrower doesn't pay, unlike a piggyback loan where the lender takes in all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home buyers prevent paying PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law designates that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent. So, keen homeowners can get off the hook sooner than expected.
Because it can take countless years to arrive at the point where the principal is just 20% of the original amount of the loan, it's crucial to know how your home has appreciated in value. After all, any appreciation you've acquired over the years counts towards dismissing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Your neighborhood may not be adhering to the national trends and/or your home could have acquired equity before things settled down, so even when nationwide trends hint at plummeting home values, you should realize that real estate is local.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At All City Appraisal, we're masters at recognizing value trends in Woodland Hills, Los Angeles County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will usually do away with the PMI with little anxiety. At that 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: