Orangecrest Appraisal Service can help you remove your Private Mortgage Insurance
When getting a mortgage, a 20% down payment is typically the standard. The lender's risk is usually only the remainder between the home value and the amount outstanding on the loan, so the 20% adds a nice buffer against the charges of foreclosure, selling the home again, and natural value changes on the chance that a borrower is unable to pay.
The market was accepting down payments as low as 10, 5 and often 0 percent during the mortgage boom of the last decade. A lender is able to manage the additional risk of the low down payment with Private Mortgage Insurance or PMI. PMI guards the lender if a borrower is unable to pay on the loan and the market price of the home is lower than what is owed on the loan.
PMI is pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and generally isn't even tax deductible. Separate from a piggyback loan where the lender consumes all the deficits, PMI is lucrative for the lender because they secure the money, and they receive payment if the borrower doesn't 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 prevent bearing the expense of PMI?
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Wise home owners can get off the hook sooner than expected. The law guarantees that, upon request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent.
It can take countless years to get to the point where the principal is only 20% of the original amount of the loan, so it's necessary to know how your home has grown in value. After all, all of the appreciation you've achieved over the years counts towards removing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Despite the fact that nationwide trends predict plunging home values, understand that real estate is local. Your neighborhood may not be following the national trends and/or your home might have secured equity before things settled down.
The hardest thing for most homeowners 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 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. Faced with figures from an appraiser, the mortgage company will often do away with the PMI with little anxiety. At that time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: