Let Karen Mann & Associates - Appraisal and Expert Witness Services help you determine if you can cancel your PMI
When getting a mortgage, a 20% down payment is typically the standard. The lender's liability is usually only the difference between the home value and the sum due on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, reselling the home, and typical value variations on the chance that a borrower defaults.
The market was working with down payments down to 10, 5 and often 0 percent during the mortgage boom of the last decade. A lender is able to endure the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI covers the lender if a borrower defaults on the loan and the worth of the property is lower than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and many times isn't even tax deductible, PMI can be expensive to a borrower. Separate from a piggyback loan where the lender takes in all the damages, PMI is beneficial for the lender because they secure the money, and they get paid 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 home buyer refrain from paying PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Keen home owners can get off the hook sooner than expected. The law states that, upon request of the home owner, the PMI must be released when the principal amount equals only 80 percent.
Since it can take many years to arrive at the point where the principal is just 20% of the initial amount borrowed, it's important to know how your home has grown in value. After all, every bit of appreciation you've gained over time counts towards dismissing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood may not be adhering to the national trends and/or your home could have secured equity before things cooled off, so even when nationwide trends forecast plummeting home values, you should understand that real estate is local.
The toughest thing for most homeowners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can certainly help. It is an appraiser's job to recognize the market dynamics of their area. At Karen Mann & Associates - Appraisal and Expert Witness Services, we're masters at recognizing value trends in Discovery Bay, Contra Costa County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will usually remove the PMI with little trouble. At which time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: