Let Karen Mann & Associates - Appraisal and Expert Witness Services help you discover if you can get rid of your PMI
It's widely understood that a 20% down payment is the standard when buying a house. Because the risk for the lender is oftentimes only the difference between the home value and the amount outstanding on the loan, the 20% supplies a nice buffer against the charges of foreclosure, selling the home again, and natural value variationsin the event a borrower is unable to pay.
During the recent mortgage boom of the last decade, it was widespread to see lenders taking down payments of 10, 5 or even 0 percent. A lender is able to endure the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. This supplemental plan guards the lender in the event a borrower is unable to pay on the loan and the value of the property is less than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI is costly to a borrower. Separate from a piggyback loan where the lender takes in all the deficits, PMI is beneficial for the lender because they collect the money, and they get the money if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homeowner refrain from bearing the expense of PMI?
The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Smart home owners can get off the hook a little earlier. The law designates that, upon request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent.
Considering it can take countless years to get to the point where the principal is just 20% of the original loan amount, it's necessary to know how your home has grown in value. After all, any appreciation you've accomplished 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 signify decreasing home values, realize that real estate is local. Your neighborhood might not be following the national trends and/or your home might have gained equity before things calmed down.
A certified, licensed real estate appraiser can help homeowners 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 recognize the market dynamics of our area. At Karen Mann & Associates - Appraisal and Expert Witness Services, we know when property values have risen or declined. We're experts at identifying value trends in Discovery Bay, Contra Costa County and surrounding areas. Faced with data from an appraiser, the mortgage company will often remove the PMI with little trouble. At that 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: