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 largely inferred that a 20% down payment is accepted when getting a mortgage. Since the risk for the lender is generally only the remainder between the home value and the sum outstanding on the loan, the 20% adds a nice cushion against the charges of foreclosure, reselling the home, and natural value fluctuationson the chance that a purchaser doesn't pay.
During the recent mortgage boom of the mid 2000s, it was common to see lenders commanding down payments of 10, 5 or even 0 percent. How does a lender endure the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower is unable to pay on the loan and the market price of the property is less than what the borrower still owes on the loan.
PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and often isn't even tax deductible. It's money-making for the lender because they secure the money, and they receive payment if the borrower is unable to pay, unlike 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 buyers can avoid bearing the expense of PMI
With the utilization 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 equals 78 percent of the primary loan amount. The law stipulates that, upon request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent. So, keen homeowners can get off the hook a little earlier.
It can take many years to get to the point where the principal is just 20% of the initial loan amount, so it's necessary to know how your home has increased in value. After all, all of the appreciation you've acquired over the years counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Your neighborhood may not be following the national trends and/or your home may have acquired equity before things cooled off, so even when nationwide trends indicate plummeting 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. An accredited, licensed real estate appraiser can definitely help. As appraisers, it's our job to know the market dynamics of our area. At All City Appraisal, we're experts at analyzing 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 cancel the PMI with little trouble. At that 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: