Have equity in your home? Want a lower payment? An appraisal from Peachtree Appraisal Inc. can help you get rid of your PMI.
A 20% down payment is usually accepted when buying a house. Since the liability for the lender is usually only the difference between the home value and the amount outstanding on the loan, the 20% provides a nice buffer against the charges of foreclosure, selling the home again, and typical value changesin the event a borrower defaults.
The market was accepting down payments as low as 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. How does a lender endure the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This added policy protects the lender in the event a borrower is unable to pay on the loan and the value of the property is less than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible, PMI can be pricey to a borrower. It's profitable for the lender because they acquire the money, and they get the money if the borrower defaults, separate from a piggyback loan where the lender takes in 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 prevent bearing the cost of PMI?
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically cease the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law pledges that, at the request of the homeowner, the PMI must be released when the principal amount equals only 80 percent. So, smart homeowners can get off the hook sooner than expected.
Since it can take countless years to arrive at 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 acquired over the years counts towards abolishing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood may not be adopting the national trends and/or your home may have acquired equity before things cooled off, so even when nationwide trends indicate plunging home values, you should understand that real estate is local.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. It's an appraiser's job to understand the market dynamics of their area. At Peachtree Appraisal Inc., we're experts at determining value trends in Irvine, Los Angeles 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 cancel the PMI with little effort. 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: