Have equity in your home? Want a lower payment? An appraisal from All City Appraisal can help you get rid of your PMI.
It's typically understood that a 20% down payment is common when buying a house. The lender's risk is usually only the remainder between the home value and the sum remaining on the loan, so the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and regular value changes on the chance that a purchaser defaults.
During the recent mortgage boom of the mid 2000s, it became widespread to see lenders taking down payments of 10, 5 or sometimes 0 percent. A lender is able to manage the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. This added policy covers the lender if a borrower doesn't pay on the loan and the market price of the house is lower than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and frequently isn't even tax deductible, PMI is pricey to a borrower. Unlike a piggyback loan where the lender consumes all the damages, PMI is lucrative for the lender because they acquire 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 home buyers keep from paying PMI?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Smart home owners can get off the hook sooner than expected. The law guarantees that, upon 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 just 20% of the original amount borrowed, so it's essential to know how your home has increased in value. After all, every bit of appreciation you've obtained over the years counts towards dismissing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood may not be following the national trends and/or your home might have secured equity before things settled down, so even when nationwide trends hint at decreasing home values, you should understand that real estate is local.
A certified, licensed real estate appraiser can help homeowners 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're experts 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 information from an appraiser, the mortgage company will most often do away with the PMI with little anxiety. At that time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: