Have equity in your home? Want a lower payment? An appraisal from Nationwide Property Valuation can help you get rid of your PMI.
A 20% down payment is typically the standard when getting a mortgage. The lender's risk is often only the difference between the home value and the amount due on the loan, so the 20% adds a nice buffer against the charges of foreclosure, reselling the home, and regular value variations in the event a borrower is unable to pay.
During the recent mortgage boom of the mid 2000s, it became common to see lenders requiring down payments of 10, 5 or sometimes 0 percent. A lender is able to endure the additional risk of the small down payment with Private Mortgage Insurance or PMI. This additional policy covers the lender in the event a borrower defaults on the loan and the market price of the property is lower than what is owed on the loan.
PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and oftentimes isn't even tax deductible. It's advantageous for the lender because they secure the money, and they get the money if the borrower doesn't pay, separate from a piggyback loan where the lender takes in 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 refrain from paying PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically cancel 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 early. The law promises that, upon request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent.
Because it can take countless years to reach the point where the principal is just 20% of the original amount of the loan, it's essential to know how your home has grown in value. After all, any appreciation you've gained over time counts towards removing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not be adopting the national trends and/or your home might have gained equity before things cooled off, so even when nationwide trends signify plunging home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. It is an appraiser's job to recognize the market dynamics of their area. At Nationwide Property Valuation, we're experts at recognizing value trends in La Jolla, San Diego 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 cancel the PMI with little trouble. At that time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: