Let Tavares Appraisals help you learn if you can eliminate your PMI
When getting a mortgage, a 20% down payment is typically the standard. Considering the liability for the lender is oftentimes only the remainder between the home value and the amount due on the loan, the 20% supplies a nice cushion against the expenses of foreclosure, selling the home again, and natural value variationson the chance that a borrower is unable to pay.
The market was working with down payments as low as 10, 5 and often 0 percent during the mortgage boom of the last decade. A lender is able to endure the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI guards the lender if a borrower doesn't pay on the loan and the value of the house is less than what the borrower still owes on the loan.
PMI can be expensive to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible. Opposite from a piggyback loan where the lender absorbs all the damages, PMI is profitable 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 a home buyer avoid bearing the cost of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Smart home owners can get off the hook ahead of time. The law promises that, at the request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent.
Since it can take many years to arrive at the point where the principal is only 20% of the original amount of the loan, it's essential to know how your home has increased in value. After all, all of the appreciation you've accomplished over time counts towards removing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Despite the fact that nationwide trends signify decreasing home values, realize that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home might have secured equity before things cooled off.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a tough thing to know. It is an appraiser's job to understand the market dynamics of their area. At Tavares Appraisals, we know when property values have risen or declined. We're experts at identifying value trends in Fremont, Alameda County and surrounding areas. When faced with figures from an appraiser, the mortgage company will often eliminate the PMI with little anxiety. At that time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: