Have equity in your home? Want a lower payment? An appraisal from Allbex Appraisal Service can help you get rid of your PMI.
A 20% down payment is usually accepted when getting a mortgage. Since the liability for the lender is often only the remainder between the home value and the sum outstanding on the loan, the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and typical value variationson the chance that a purchaser doesn't pay.
During the recent mortgage upturn of the last decade, it became customary to see lenders requiring down payments of 10, 5 or even 0 percent. How does a lender handle the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This added policy takes care of the lender if a borrower doesn't pay on the loan and the value of the home is less than the loan balance.
PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and generally isn't even tax deductible. Opposite from a piggyback loan where the lender absorbs all the losses, PMI is money-making for the lender because they obtain the money, and they receive payment 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 keep from paying PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law states that, upon request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent. So, wise homeowners can get off the hook sooner than expected.
It can take many years to get to 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 increased in value. After all, any appreciation you've accomplished over the years counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not be reflecting the national trends and/or your home could have gained equity before things simmered down, so even when nationwide trends forecast decreasing home values, you should understand that real estate is local.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. It is an appraiser's job to keep up with the market dynamics of their area. At Allbex Appraisal Service, we're experts at identifying value trends in Laguna Beach, Orange 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 most often remove the PMI with little trouble. 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: