Mission Peak Appraisals can help you remove your Private Mortgage Insurance
When buying a house, a 20% down payment is typically the standard. The lender's liability is usually only the difference between the home value and the amount remaining on the loan, so the 20% supplies a nice cushion against the costs of foreclosure, selling the home again, and natural value fluctuations in the event a borrower is unable to pay.
Lenders were accepting down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplemental plan guards the lender if a borrower is unable to pay on the loan and the value of the house is less than what the borrower still owes on 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. It's beneficial for the lender because they obtain the money, and they get paid if the borrower doesn't pay, opposite from a piggyback loan where the lender consumes all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home buyers keep from paying PMI?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Wise home owners can get off the hook a little earlier. The law designates that, upon request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent.
It can take countless years to arrive at the point where the principal is just 20% of the initial amount of the loan, so it's crucial to know how your home has grown in value. After all, any appreciation you've gained over the years counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Even when nationwide trends forecast declining home values, understand that real estate is local. Your neighborhood might not be heeding the national trends and/or your home could have acquired equity before things cooled off.
A certified, 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. As appraisers, it's our job to know the market dynamics of our area. At Mission Peak Appraisals , we're masters at pinpointing value trends in Fremont, Alameda 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 often cancel the PMI with little anxiety. 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: