C.D. McCullough Real Estate Appraisal can help you remove your Private Mortgage Insurance
When buying a house, a 20% down payment is usually the standard. The lender's risk is generally only the difference between the home value and the amount due on the loan, so the 20% adds a nice buffer against the costs of foreclosure, reselling the home, and regular value variations in the event a borrower doesn't pay.
The market was taking down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender manage the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This additional plan guards the lender if a borrower doesn't pay on the loan and the value of the house is less than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and generally isn't even tax deductible, PMI can be expensive to a borrower. Opposite from a piggyback loan where the lender absorbs all the costs, PMI is money-making for the lender because they secure the money, and they get the money if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homebuyers refrain from bearing the expense of PMI?
With the employment 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 primary loan amount. Savvy home owners can get off the hook a little earlier. The law guarantees that, at the request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent.
It can take many years to arrive at the point where the principal is just 20% of the original loan amount, so it's essential to know how your home has appreciated in value. After all, any appreciation you've accomplished 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 reflecting the national trends and/or your home might have gained equity before things settled down, so even when nationwide trends signify decreasing home values, you should realize that real estate is local.
The toughest thing for most homeowners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can surely help. As appraisers, it's our job to recognize the market dynamics of our area. At C.D. McCullough Real Estate Appraisal, we're masters at recognizing value trends in Colton, San Bernardino County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will generally drop the PMI with little trouble. At which time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link:
Would you like to save money by not having to pay for Private Mortgage Insurance? We can help. Simply fill out the form below as completely as possible and we'll send you information on how to save PMI expenses, with no obligation to you. We guarantee your privacy.