Have equity in your home? Want a lower payment? An appraisal from ARA Real Estate Appraisals, Inc. can help you get rid of your PMI.
A 20% down payment is usually accepted when getting a mortgage. The lender's liability is oftentimes only the remainder between the home value and the amount due on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and typical value changes on the chance that a borrower is unable to pay.
Lenders were accepting down payments down to 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. A lender is able to manage the additional risk of the low down payment with Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower is unable to pay on the loan and the worth of the home is less than what is owed on the loan.
PMI can be costly to a borrower in that 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 profitable for the lender because they acquire the money, and they get paid if the borrower defaults, separate from a piggyback loan where the lender consumes all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homebuyers can keep from bearing the expense of PMI
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Keen home owners can get off the hook beforehand. The law promises that, upon request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent.
Because it can take many years to arrive at the point where the principal is only 20% of the initial amount borrowed, it's essential to know how your home has grown in value. After all, all of the appreciation you've accomplished over time counts towards abolishing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood may not be heeding the national trends and/or your home may have gained equity before things simmered down, so even when nationwide trends signify declining 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 goes over the 20% point, as it's a difficult thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At ARA Real Estate Appraisals, Inc., we're masters at recognizing value trends in Diamond Bar, Los Angeles County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will generally do away with the PMI with little trouble. At which 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: