Let Hemet Appraisers help you determine if you can get rid of your PMI
It's widely inferred that a 20% down payment is the standard when purchasing a home. The lender's risk is oftentimes only the difference between the home value and the sum due on the loan, so the 20% provides a nice buffer against the charges of foreclosure, selling the home again, and regular value fluctuations on the chance that a purchaser doesn't pay.
Lenders were taking down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender endure the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower is unable to pay on the loan and the value of the home is lower than what the borrower still owes on the loan.
PMI is pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and frequently isn't even tax deductible. It's advantageous for the lender because they obtain the money, and they get paid if the borrower defaults, opposite from a piggyback loan where the lender absorbs all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homeowners can prevent bearing the cost of PMI
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Keen homeowners can get off the hook sooner than expected. The law guarantees that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent.
Since it can take many years to get to the point where the principal is just 20% of the original amount borrowed, it's essential to know how your home has appreciated in value. After all, any appreciation you've acquired over the years counts towards abolishing PMI. So why pay it after your loan balance has dropped below the 80% mark? Your neighborhood might not be following the national trends and/or your home might have acquired equity before things settled down, so even when nationwide trends hint at plummeting home values, you should understand that real estate is local.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity rises above 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 Hemet Appraisers, we know when property values have risen or declined. We're masters at determining value trends in Hemet/San Jacinto Valley and surrounding areas of southwest Riverside County. When faced with data from an appraiser, the mortgage company will generally drop the PMI with little effort. At which time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: