Have equity in your home? Want a lower payment? An appraisal from C.D. McCullough Real Estate Appraisal can help you get rid of your PMI.
A 20% down payment is typically the standard when purchasing a home. Because the risk for the lender is generally only the remainder between the home value and the amount due on the loan, the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and typical value variationsin the event a borrower is unable to pay.
Banks were taking down payments as low as 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. A lender is able to handle the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI protects the lender if a borrower defaults on the loan and the value of the home is less than what is owed on the loan.
PMI is costly to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and frequently isn't even tax deductible. It's lucrative for the lender because they secure the money, and they get paid if the borrower doesn't pay, unlike a piggyback loan where the lender absorbs all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home owner avoid bearing the cost of PMI?
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically stop the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Acute home owners can get off the hook ahead of time. The law states that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent.
It can take many years to arrive at the point where the principal is only 20% of the initial amount of the loan, so it's important to know how your home has increased in value. After all, every bit of appreciation you've obtained over time counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% threshold? Despite the fact that nationwide trends indicate decreasing home values, realize that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home might have acquired equity before things calmed down.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At C.D. McCullough Real Estate Appraisal, we're experts at determining value trends in Colton, San Bernardino County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will most often remove the PMI with little anxiety. 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:
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