Let Verschelden Appraisals help you determine if you can get rid of your PMI
When buying a house, a 20% down payment is typically the standard. Because the liability for the lender is generally only the remainder between the home value and the sum due on the loan, the 20% supplies a nice cushion against the charges of foreclosure, reselling the home, and natural value changesin the event a purchaser defaults.
The market was accepting down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender handle the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplementary plan takes care of the lender in case a borrower is unable to pay on the loan and the value of the house is less than what is owed on the loan.
PMI can be expensive to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and frequently isn't even tax deductible. It's lucrative for the lender because they acquire the money, and they get the money if the borrower is unable to pay, separate from a piggyback loan where the lender absorbs all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homeowner keep from paying PMI?
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Wise home owners can get off the hook a little earlier. The law designates that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent.
It can take countless years to reach the point where the principal is only 20% of the initial loan amount, so it's crucial to know how your home has grown in value. After all, any appreciation you've obtained over the years counts towards abolishing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Your neighborhood might not be heeding the national trends and/or your home could have gained equity before things simmered down, so even when nationwide trends forecast plummeting home values, you should realize that real estate is local.
The difficult thing for many home owners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. As appraisers, it's our job to keep up with the market dynamics of our area. At Verschelden Appraisals, we're masters at recognizing value trends in Modesto, Stanislaus County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will most often cancel the PMI with little anxiety. At that time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: