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 generally inferred that a 20% down payment is the standard when getting a mortgage. The lender's liability is often only the remainder between the home value and the amount due on the loan, so the 20% supplies a nice cushion against the costs of foreclosure, selling the home again, and regular value changes in the event a borrower doesn't pay.
During the recent mortgage boom of the mid 2000s, it was widespread to see lenders requiring down payments of 10, 5 or sometimes 0 percent. A lender is able to endure the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. This additional plan protects the lender in the event a borrower defaults on the loan and the market price of the property is lower than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI is pricey to a borrower. Unlike a piggyback loan where the lender consumes all the damages, PMI is beneficial for the lender because they secure the money, and they get paid 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 home buyers can avoid bearing the expense of PMI
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Acute homeowners can get off the hook ahead of time. The law designates that, upon request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent.
Considering it can take many years to arrive at the point where the principal is just 20% of the initial amount of the loan, it's crucial to know how your home has increased in value. After all, all of the appreciation you've accomplished over the years counts towards abolishing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Your neighborhood may not be following the national trends and/or your home could have acquired equity before things simmered down, so even when nationwide trends hint at plunging 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 goes over the 20% point, as it's a hard thing to know. It's an appraiser's job to keep up with the market dynamics of their area. At All City Appraisal, we're masters 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 information from an appraiser, the mortgage company will most often do away with the PMI with little effort. At which 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: