Let Timely Appraisals, Inc. help you figure out if you can get rid of your PMIIt's generally understood that a 20% down payment is the standard when getting a mortgage. The lender's only risk is often just the difference between the home value and the sum due on the loan, so the 20% adds a nice cushion against the costs of foreclosure, reselling the home, and regular value changes on the chance that a borrower defaults.
The market was taking down payments as low as 10, 5 and frequently 0 percent in the peak of last decade's mortgage boom. How does a lender manage the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower doesn't pay on the loan and the value of the property is less than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and on many occasions isn't even tax deductible, PMI can be costly to a borrower. Separate from a piggyback loan where the lender takes in all the deficits, PMI is money-making for the lender because they obtain the money, and they receive payment if the borrower defaults.
How homeowners can prevent bearing the expense of PMIThe Homeowners Protection Act of 1998 forces the lenders on the majority of loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law pledges that, at the request of the home owner, the PMI must be released when the principal amount reaches just 80 percent. So, savvy homeowners can get off the hook sooner than expected.
Since it can take several years to arrive at the point where the principal is only 80% of the initial amount borrowed, it's essential to know how your California home has increased in value. After all, all of the appreciation you've accomplished over the years counts towards dismissing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not follow national trends and/or your home might have acquired equity before things cooled off. So even when nationwide trends forecast decreasing home values, you should realize that real estate is local.
An accredited, California licensed real estate appraiser can help homeowners figure out if their equity has reached the 20% point, as it's a difficult thing to know. It's an appraiser's job to understand the market dynamics of their area. At Timely Appraisals, Inc., we know when property values have risen or declined. We're experts at identifying value trends in CANYON CNTRY, Los Angeles County, and surrounding areas. Faced with information from an appraiser, the mortgage company will generally drop the PMI with little effort. At that time, the home owner can delight in the savings from that point on.
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