Let Karen Mann & Associates - Appraisal and Expert Witness Services help you figure out if you can cancel your PMI
A 20% down payment is typically the standard when purchasing a home. Because the liability for the lender is often only the difference between the home value and the sum due on the loan, the 20% supplies a nice cushion against the charges of foreclosure, reselling the home, and typical value changeson the chance that a borrower doesn't pay.
The market was taking down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. This additional plan protects the lender in the event a borrower is unable to pay on the loan and the market price of the home is less than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and generally isn't even tax deductible, PMI can be costly to a borrower. Separate from a piggyback loan where the lender consumes all the costs, PMI is lucrative 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 homebuyers can refrain from bearing the cost of PMI
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Acute homeowners can get off the hook sooner than expected. The law designates that, at the request of the home owner, the PMI must be dropped when the principal amount equals just 80 percent.
Since it can take many years to reach the point where the principal is just 20% of the initial loan amount, it's essential to know how your home has grown in value. After all, all of the appreciation you've acquired over the years counts towards abolishing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Your neighborhood may not be minding the national trends and/or your home might have gained equity before things simmered down, so even when nationwide trends forecast falling home values, you should understand that real estate is local.
The toughest thing for almost all homeowners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely 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 analyzing value trends in Discovery Bay, Contra Costa County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will most often remove the PMI with little trouble. At that 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: