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.
A 20% down payment is usually the standard when getting a mortgage. The lender's liability is often only the difference between the home value and the amount outstanding on the loan, so the 20% adds a nice buffer against the charges of foreclosure, reselling the home, and natural value fluctuations on the chance that a borrower defaults.
During the recent mortgage upturn of the last decade, it was customary to see lenders requiring 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 supplementary plan takes care of the lender if a borrower doesn't pay on the loan and the market price of the house is lower than what the borrower still owes on the loan.
PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and generally isn't even tax deductible. Different from a piggyback loan where the lender absorbs all the losses, PMI is beneficial for the lender because they obtain the money, and they get the money if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homebuyers refrain from bearing the expense of PMI?
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law promises that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent. So, keen home owners can get off the hook a little earlier.
Because it can take countless years to reach the point where the principal is only 20% of the original amount of the loan, it's important to know how your home has increased in value. After all, all of the appreciation you've obtained over the years counts towards abolishing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Even when nationwide trends predict decreasing home values, realize that real estate is local. Your neighborhood may not be minding the national trends and/or your home may have acquired equity before things simmered down.
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. As appraisers, it's our job to keep up with 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 determining value trends in Discovery Bay, Contra Costa County and surrounding areas. When faced with data from an appraiser, the mortgage company will most often eliminate the PMI with little anxiety. At which time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: