Action Appraisers, Inc. can help you remove your Private Mortgage Insurance
A 20% down payment is usually the standard when purchasing a home. Considering the liability for the lender is generally only the difference between the home value and the amount due on the loan, the 20% provides a nice buffer against the expenses of foreclosure, selling the home again, and typical value fluctuationsin the event a purchaser defaults.
During the recent mortgage boom of the mid 2000s, it was common to see lenders taking down payments of 10, 5 or even 0 percent. A lender is able to handle the added risk of the minimal down payment with Private Mortgage Insurance or PMI. This additional policy takes care of the lender in case a borrower doesn't pay on the loan and the worth of the property is lower than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and frequently isn't even tax deductible, PMI is pricey to a borrower. It's profitable for the lender because they obtain the money, and they receive payment if the borrower doesn't pay, opposite from a piggyback loan where the lender takes in all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homeowners can avoid bearing the expense of PMI
The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law states that, at the request of the home owner, the PMI must be released when the principal amount reaches just 80 percent. So, acute home owners can get off the hook ahead of time.
Because it can take many years to get to the point where the principal is just 20% of the original amount borrowed, it's essential to know how your home has grown in value. After all, every bit of appreciation you've acquired over time counts towards removing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Despite the fact that nationwide trends hint at declining home values, be aware that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home could have acquired equity before things calmed down.
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 tough thing to know. As appraisers, it's our job to know the market dynamics of our area. At Action Appraisers, Inc., we're experts at analyzing value trends in Escondido, San Diego 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 remove the PMI with little anxiety. At that time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: