JM Residental Appraisal Services can help you remove your Private Mortgage Insurance
A 20% down payment is usually the standard when getting a mortgage. The lender's risk is often only the difference between the home value and the amount due on the loan, so the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and typical value fluctuations on the chance that a borrower doesn't pay.
During the recent mortgage upturn of the last decade, it became widespread to see lenders taking down payments of 10, 5 or even 0 percent. A lender is able to endure the added risk of the small down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower is unable to pay on the loan and the value of the home is lower than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and many times isn't even tax deductible, PMI is costly to a borrower. Separate from a piggyback loan where the lender absorbs all the deficits, PMI is beneficial for the lender because they acquire the money, and they get the money if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home buyers avoid paying PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law pledges that, upon request of the homeowner, the PMI must be released when the principal amount equals just 80 percent. So, wise home owners can get off the hook a little early.
Since it can take countless years to arrive at the point where the principal is only 20% of the initial amount borrowed, it's important to know how your home has appreciated in value. After all, every bit of appreciation you've achieved over the years counts towards dismissing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood may not be adopting the national trends and/or your home might have secured equity before things cooled off, so even when nationwide trends indicate falling home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. It's an appraiser's job to know the market dynamics of their area. At JM Residental Appraisal Services, we know when property values have risen or declined. We're masters at identifying value trends in Riverside, Riverside County and surrounding areas. When faced with figures from an appraiser, the mortgage company will generally remove the PMI with little trouble. At which time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: