Accu Value Appraisals can help you remove your Private Mortgage InsuranceWhen purchasing a home, a 20% down payment is usually the standard. The lender's risk is oftentimes only the remainder between the home value and the balance due on the loan, so the 20% adds a nice buffer against the costs of foreclosure, selling the home again, and regular value changes on the chance that a borrower is unable to pay.
During the recent mortgage upturn that our country recently experienced, it was common to see lenders only asking for down payments of 10, 5 or sometimes 0 percent. A lender is able to endure the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower is unable to pay on the loan and the market price of the house is lower than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and frequently isn't even tax deductible, PMI is costly to a borrower. Unlike a piggyback loan where the lender takes in all the losses, PMI is favorable for the lender because they acquire the money, and they are covered if the borrower is unable to pay.
How can home owners prevent paying PMI?With the implementation of The Homeowners Protection Act of 1998, lenders are obligated to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount on most loans. Savvy homeowners can get off the hook a little earlier. The law guarantees that, at the request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent.
Since it can take a significant number of years to get to the point where the principal is just 80% of the original loan amount, it's essential to know how your California home has appreciated in value. After all, any appreciation you've obtained over time counts towards dismissing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Your neighborhood might not follow national trends and/or your home may have secured equity before things simmered down. So even when nationwide trends predict a reduction in home values, you should understand that real estate is local.
The toughest thing for almost all homeowners to figure out is just when their home's equity rises above the 20% point. An accredited, California licensed real estate appraiser can surely help. As appraisers, it's our job to keep up with the market dynamics of our area. At Accu Value Appraisals, we know when property values have risen or declined. We're masters at analyzing value trends in View Park, Los Angeles County, and surrounding areas. Faced with figures from an appraiser, the mortgage company will often drop the PMI with little trouble. At that 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: