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Let The Appraisal Firm help you learn if you can eliminate your PMI
A 20% down payment is typically the standard when getting a mortgage.
Considering the liability for the lender is generally only the remainder between the home value and the sum due on the loan, the 20% provides a nice buffer against the expenses of foreclosure, reselling the home, and regular value changes in the event a borrower defaults.
During the recent mortgage upturn that our country recently experienced, it became common to see lenders only asking for down payments of 10, 5 or often 0 percent.
How does a lender manage the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI.
This added plan takes care of the lender in the event a borrower is unable to pay on the loan and the market price of the home is less than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI is costly to a borrower.
Unlike a piggyback loan where the lender absorbs all the losses, PMI is profitable for the lender because they secure the money, and they are covered if the borrower defaults.
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The money you keep from cancelling the PMI required when you got your mortgage pays for the appraisal in a matter of months. Nobody is more qualified than The Appraisal Firm when it comes to appreciating values in the city of Carlsbad and San Diego County. Contact us today.
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How can a home owner keep from paying PMI?
With the implementation of The Homeowners Protection Act of 1998, lenders are required to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the original loan amount on nearly all loans.
Smart homeowners can get off the hook beforehand. The law pledges that, upon request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent.
It can take a significant number of years to reach the point where the principal is only 80% of the original loan amount, so it's essential to know how your California home has increased in value.
After all, all of the appreciation you've obtained over the years counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold?
Your neighborhood may not conform to national trends and/or your home could have secured equity before the economy simmered down. So even when nationwide trends signify a reduction in home values, you should understand that real estate is local.
An accredited, California licensed real estate appraiser can help homeowners figure out 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 The Appraisal Firm, we know when property values have risen or declined. We're experts at identifying value trends in Carlsbad, San Diego County, and surrounding areas.
When faced with figures from an appraiser, the mortgage company will most often cancel the PMI with little anxiety. At which time, the homeowner can retain the savings from that point on.
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Did you secure your mortgage with less than 20% down? Call The Appraisal Firm today at 760-476-0130 to see if you can get rid of your Private Mortgage Insurance payment.
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Want to learn more about PMI and the Homeowners Protection Act? Click this link:
Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year
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