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 purchasing a home, a 20% down payment is usually the standard. The lender's risk is oftentimes only the difference between the home value and the sum remaining on the loan, so the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and regular value variations on the chance that a borrower is unable to pay.
During the recent mortgage upturn of the mid 2000s, it was customary to see lenders commanding down payments of 10, 5 or even 0 percent. How does a lender endure the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This supplemental plan takes care of the lender if a borrower doesn't pay on the loan and the market price of the home is lower than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and oftentimes isn't even tax deductible, PMI can be costly to a borrower. It's advantageous for the lender because they secure the money, and they get paid if the borrower is unable to pay, separate from a piggyback loan where the lender consumes all the deficits.
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 prevent bearing the expense of PMI?
The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically eliminate 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 abandoned when the principal amount equals just 80 percent. So, savvy home owners can get off the hook ahead of time.
Considering it can take many years to reach the point where the principal is just 20% of the initial loan amount, it's important to know how your home has appreciated in value. After all, all of the appreciation you've gained over time counts towards abolishing PMI. So why pay it after your loan balance has dropped below the 80% mark? Your neighborhood might not be adhering to the national trends and/or your home may have secured equity before things cooled off, so even when nationwide trends forecast plunging home values, you should realize that real estate is local.
The toughest thing for many home owners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can certainly help. It's an appraiser's job to recognize 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 recognizing value trends in Discovery Bay, Contra Costa County and surrounding areas. Faced with figures from an appraiser, the mortgage company will usually cancel 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: