1 Hour Appraisal can help you remove your Private Mortgage Insurance
It's generally understood that a 20% down payment is common when buying a house. The lender's liability is oftentimes only the remainder between the home value and the amount outstanding on the loan, so the 20% provides a nice buffer against the costs of foreclosure, reselling the home, and typical value changes in the event a borrower doesn't pay.
During the recent mortgage upturn of the last decade, it became common to see lenders requiring down payments of 10, 5 or sometimes 0 percent. A lender is able to manage the increased risk of the small down payment with Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower defaults on the loan and the value of the property 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 often isn't even tax deductible, PMI can be costly to a borrower. Contradictory to a piggyback loan where the lender consumes all the costs, PMI is favorable for the lender because they acquire the money, and they get the money if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home buyers refrain from bearing the expense of PMI?
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Wise home owners can get off the hook beforehand. The law states that, at the request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent.
It can take countless years to get to the point where the principal is just 20% of the original amount borrowed, so it's necessary to know how your home has grown in value. After all, every bit of appreciation you've acquired over the years counts towards removing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% mark? Your neighborhood may not be heeding the national trends and/or your home may have gained equity before things settled down, so even when nationwide trends forecast decreasing home values, you should understand that real estate is local.
The difficult thing for almost all homeowners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can surely help. As appraisers, it's our job to know the market dynamics of our area. At 1 Hour Appraisal, we're experts at recognizing value trends in Fresno, Fresno County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will usually eliminate the PMI with little effort. At that time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: