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.
It's largely inferred that a 20% down payment is common when purchasing a home. Since the liability for the lender is generally only the difference between the home value and the sum due on the loan, the 20% adds a nice buffer against the charges of foreclosure, reselling the home, and natural value changesin the event a borrower doesn't pay.
The market was accepting down payments down to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. How does a lender endure the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower is unable to pay on the loan and the value of the home is less than what is owed on the loan.
PMI is pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and many times isn't even tax deductible. Different from a piggyback loan where the lender consumes all the damages, PMI is favorable for the lender because they acquire the money, and they get the money if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home owners refrain from bearing the expense 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 reaches 78 percent of the beginning loan amount. The law guarantees that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, wise home owners can get off the hook ahead of time.
Since it can take many years to get to the point where the principal is just 20% of the original amount borrowed, it's crucial to know how your home has grown in value. After all, all of the appreciation you've acquired 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 heeding the national trends and/or your home might have acquired equity before things settled down, so even when nationwide trends indicate falling home values, you should understand that real estate is local.
The difficult 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 surely help. 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're experts 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 data from an appraiser, the mortgage company will generally do away with the PMI with little trouble. At that 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: