Let Orangecrest Appraisal Service help you determine if you can eliminate your PMI
A 20% down payment is usually accepted when buying a house. Since the liability for the lender is oftentimes only the difference between the home value and the amount due on the loan, the 20% adds a nice buffer against the expenses of foreclosure, selling the home again, and regular value changeson the chance that a borrower is unable to pay.
Banks were taking down payments down to 10, 5 and even 0 percent during the mortgage boom of the last decade. How does a lender manage the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower defaults on the loan and the worth of the property is less than the loan balance.
PMI can be costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and generally isn't even tax deductible. Unlike a piggyback loan where the lender absorbs all the damages, PMI is favorable 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 can a buyer avoid bearing the cost of PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law designates that, upon request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent. So, acute home owners can get off the hook sooner than expected.
Because it can take many years to arrive at the point where the principal is just 20% of the initial loan amount, it's crucial to know how your home has grown in value. After all, every bit of appreciation you've accomplished over time counts towards removing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold? Your neighborhood may not be adopting the national trends and/or your home might have gained equity before things simmered down, so even when nationwide trends indicate plummeting home values, you should realize that real estate is local.
The toughest thing for many homeowners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can surely help. It is an appraiser's job to understand the market dynamics of their area. At Orangecrest Appraisal Service, we're experts at determining value trends in Riverside, Riverside County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will generally cancel the PMI with little anxiety. At that time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: