Have equity in your home? Want a lower payment? An appraisal from Best Working Appraisals can help you get rid of your PMI.
It's largely understood that a 20% down payment is accepted when buying a house. Because the risk for the lender is generally only the remainder between the home value and the sum remaining on the loan, the 20% adds a nice buffer against the expenses of foreclosure, reselling the home, and natural value fluctuationsin the event a purchaser defaults.
During the recent mortgage boom of the last decade, it became common to see lenders commanding down payments of 10, 5 or often 0 percent. How does a lender endure the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower is unable to pay on the loan and the worth of the house is less than the loan balance.
PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and oftentimes isn't even tax deductible. It's profitable for the lender because they secure the money, and they receive payment if the borrower is unable to pay, different from a piggyback loan where the lender absorbs all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home buyers can refrain from paying PMI
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Smart homeowners can get off the hook beforehand. The law guarantees that, upon request of the homeowner, the PMI must be released when the principal amount equals just 80 percent.
It can take many years to arrive at the point where the principal is only 20% of the original amount of the loan, so it's important to know how your home has increased in value. After all, every bit of appreciation you've acquired over time counts towards abolishing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood may not be adhering to the national trends and/or your home might have acquired equity before things cooled off, so even when nationwide trends indicate declining home values, you should realize that real estate is local.
An accredited, 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 is an appraiser's job to keep up with the market dynamics of their area. At Best Working Appraisals, we're experts at recognizing value trends in Port Hueneme, Ventura County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will generally eliminate 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: