American Appraisal, Inc. can help you remove your Private Mortgage Insurance
It's generally known that a 20% down payment is the standard when purchasing a home. The lender's risk is often only the remainder between the home value and the sum outstanding on the loan, so the 20% supplies a nice cushion against the expenses of foreclosure, reselling the home, and typical value changes on the chance that a purchaser is unable to pay.
The market was taking down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender handle the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower defaults on the loan and the worth of the property is lower than the balance of the loan.
PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and often isn't even tax deductible. Contradictory to a piggyback loan where the lender absorbs all the deficits, PMI is lucrative for the lender because they obtain 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 homeowner avoid paying PMI?
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Smart homeowners can get off the hook beforehand. The law promises that, upon request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent.
Considering it can take countless years to get to the point where the principal is only 20% of the original amount borrowed, it's important to know how your home has appreciated in value. After all, all of the appreciation you've achieved over the years counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% mark? Your neighborhood may not be following the national trends and/or your home might have acquired equity before things cooled off, so even when nationwide trends predict declining home values, you should realize that real estate is local.
The hardest thing for most homeowners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can certainly help. As appraisers, it's our job to keep up with the market dynamics of our area. At American Appraisal, Inc., we're experts at analyzing value trends in Bakersfield, Kern 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 most often cancel the PMI with little effort. At that 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: