Karen Mann & Associates - Appraisal and Expert Witness Services can help you remove your Private Mortgage Insurance
When buying a house, a 20% down payment is usually the standard. Since the liability for the lender is often only the remainder between the home value and the amount remaining on the loan, the 20% provides a nice cushion against the charges of foreclosure, selling the home again, and natural value changesin the event a purchaser doesn't pay.
During the recent mortgage boom of the last decade, it became widespread to see lenders requiring down payments of 10, 5 or even 0 percent. How does a lender endure the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This additional plan guards the lender in case a borrower is unable to pay on the loan and the value of the property is less than what the borrower still owes on the loan.
PMI is pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and many times isn't even tax deductible. It's lucrative for the lender because they obtain the money, and they get the money if the borrower doesn't pay, unlike a piggyback loan where the lender consumes all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homebuyer avoid paying PMI?
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law pledges that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, keen homeowners can get off the hook sooner than expected.
Because it can take many years to arrive at the point where the principal is only 20% of the initial amount borrowed, it's essential to know how your home has grown in value. After all, all of the appreciation you've gained over time counts towards abolishing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Even when nationwide trends indicate plunging home values, be aware that real estate is local. Your neighborhood may not be minding the national trends and/or your home could have gained equity before things cooled off.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. As appraisers, it's our job to know 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. Faced with figures from an appraiser, the mortgage company will most often drop the PMI with little trouble. At which time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: