Have equity in your home? Want a lower payment? An appraisal from Karen Mann & Associates - Appraisal and Expert Witness Services can help you get rid of your PMI.
When buying a house, a 20% down payment is usually the standard. Considering the liability for the lender is often only the difference between the home value and the sum outstanding on the loan, the 20% supplies a nice cushion against the expenses of foreclosure, reselling the home, and regular value variationson the chance that a purchaser is unable to pay.
Lenders were working with down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender handle the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This added policy takes care of the lender in the event a borrower doesn't pay on the loan and the value of the home is lower than what the borrower still owes on the loan.
PMI is pricey to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and many times isn't even tax deductible. It's lucrative for the lender because they obtain the money, and they get paid if the borrower defaults, unlike a piggyback loan where the lender takes in all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home owners can avoid bearing the expense of PMI
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically cease the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Wise home owners can get off the hook sooner than expected. The law designates that, upon request of the homeowner, the PMI must be released when the principal amount equals just 80 percent.
It can take countless years to arrive at the point where the principal is only 20% of the original amount of the loan, so it's crucial to know how your home has grown in value. After all, every bit of appreciation you've obtained over the years counts towards removing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Your neighborhood might not be minding the national trends and/or your home could have gained equity before things cooled off, so even when nationwide trends predict plummeting home values, you should understand that real estate is local.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a tough thing to know. It's an appraiser's job to understand the market dynamics of their area. At Karen Mann & Associates - Appraisal and Expert Witness Services, we know when property values have risen or declined. We're experts at determining value trends in Discovery Bay, Contra Costa County and surrounding areas. When faced with information from an appraiser, the mortgage company will generally drop the PMI with little trouble. At that time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: