Orangecrest Appraisal Service can help you remove your Private Mortgage Insurance
When purchasing a home, a 20% down payment is usually the standard. Because the risk for the lender is usually only the remainder between the home value and the sum outstanding on the loan, the 20% adds a nice buffer against the costs of foreclosure, selling the home again, and natural value variationson the chance that a borrower is unable to pay.
During the recent mortgage upturn of the last decade, it became common to see lenders commanding down payments of 10, 5 or often 0 percent. How does a lender manage the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This added policy covers the lender in the event a borrower doesn't pay on the loan and the market price of the home is less than what is owed on the loan.
PMI can be costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and often isn't even tax deductible. It's beneficial for the lender because they collect the money, and they receive payment if the borrower defaults, contradictory to a piggyback loan where the lender absorbs all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can buyers refrain from bearing the expense of PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Wise home owners can get off the hook beforehand. The law stipulates that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent.
It can take many years to reach the point where the principal is just 20% of the original amount of the loan, so it's important to know how your home has appreciated in value. After all, all of the appreciation you've accomplished over time counts towards abolishing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Your neighborhood might not be following the national trends and/or your home may have acquired equity before things simmered down, so even when nationwide trends indicate plummeting home values, you should understand that real estate is local.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At Orangecrest Appraisal Service, we know when property values have risen or declined. We're experts at recognizing value trends in Riverside, Riverside County and surrounding areas. When faced with figures from an appraiser, the mortgage company will most often cancel the PMI with little anxiety. At which 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: