All City Appraisal can help you remove your Private Mortgage Insurance
When buying a house, a 20% down payment is typically the standard. Because the liability for the lender is usually only the difference between the home value and the sum due on the loan, the 20% supplies a nice buffer against the costs of foreclosure, reselling the home, and typical value fluctuationsin the event a borrower defaults.
The market was taking down payments as low as 10, 5 and often 0 percent during the mortgage boom of the last decade. A lender is able to manage the added risk of the low down payment with Private Mortgage Insurance or PMI. PMI protects the lender in the event a borrower is unable to pay on the loan and the value of the property is lower than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and oftentimes isn't even tax deductible, PMI can be expensive to a borrower. It's profitable for the lender because they acquire the money, and they get paid if the borrower doesn't pay, opposite from a piggyback loan where the lender consumes all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home buyer keep from paying PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law designates that, at the request of the homeowner, the PMI must be released when the principal amount equals only 80 percent. So, smart home owners can get off the hook a little early.
It can take countless years to get to the point where the principal is only 20% of the original amount of the loan, so it's necessary to know how your home has grown in value. After all, every bit of appreciation you've acquired over the years counts towards abolishing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Your neighborhood may not be minding the national trends and/or your home might have acquired equity before things simmered down, so even when nationwide trends indicate falling home values, you should realize that real estate is local.
The difficult thing for almost all home owners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can definitely help. It's an appraiser's job to understand the market dynamics of their area. At All City Appraisal, we're experts at identifying value trends in Woodland Hills, Los Angeles County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will generally eliminate the PMI with little anxiety. At which 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: