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.
When purchasing a home, a 20% down payment is typically the standard. Considering the risk for the lender is usually only the difference between the home value and the amount remaining on the loan, the 20% provides a nice buffer against the expenses of foreclosure, reselling the home, and natural value variationson the chance that a purchaser is unable to pay.
During the recent mortgage boom of the last decade, it became common to see lenders requiring down payments of 10, 5 or often 0 percent. How does a lender manage the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This supplementary policy takes care of the lender if a borrower defaults on the loan and the value of the house is lower than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and many times isn't even tax deductible, PMI can be pricey to a borrower. It's beneficial for the lender because they secure the money, and they get the money if the borrower is unable to pay, different from a piggyback loan where the lender consumes 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 home buyer avoid bearing the expense of PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Savvy home owners can get off the hook sooner than expected. The law states that, at the request of the home owner, the PMI must be released when the principal amount reaches just 80 percent.
Since it can take many years to arrive at the point where the principal is only 20% of the original amount of the loan, it's necessary to know how your home has increased in value. After all, any appreciation you've accomplished over time counts towards dismissing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Your neighborhood might not be adopting the national trends and/or your home may have gained equity before things simmered down, so even when nationwide trends signify falling home values, you should realize that real estate is local.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above 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. When faced with data from an appraiser, the mortgage company will often remove the PMI with little effort. At that 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:
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