Peterson Appraisal Group can help you remove your Private Mortgage Insurance
A 20% down payment is typically accepted when getting a mortgage. The lender's risk is usually only the difference between the home value and the amount outstanding on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, reselling the home, and typical value fluctuations on the chance that a borrower defaults.
The market was working with down payments as low as 10, 5 and even 0 percent during the mortgage boom of the last decade. How does a lender manage the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower doesn't pay on the loan and the market price of the home is less than the loan balance.
PMI is pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and often isn't even tax deductible. Opposite from a piggyback loan where the lender consumes all the costs, PMI is lucrative for the lender because they secure the money, and they get paid 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 a home owner avoid bearing the expense of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Acute homeowners can get off the hook a little earlier. The law pledges that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent.
It can take many years to reach the point where the principal is just 20% of the original amount of the loan, so it's necessary to know how your home has appreciated in value. After all, every bit of appreciation you've acquired over time counts towards abolishing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends forecast plunging home values, understand that real estate is local. Your neighborhood might not be minding the national trends and/or your home may have secured equity before things cooled off.
The difficult thing for most homeowners to understand 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 recognize the market dynamics of our area. At Peterson Appraisal Group, we're masters at analyzing value trends in Rocklin, Placer County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will usually eliminate the PMI with little anxiety. At which time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: