Compass Appraisals can help you remove your Private Mortgage Insurance
It's typically known that a 20% down payment is accepted when getting a mortgage. The lender's liability is oftentimes only the remainder between the home value and the sum remaining on the loan, so the 20% supplies a nice buffer against the costs of foreclosure, reselling the home, and typical value variations on the chance that a borrower doesn't pay.
During the recent mortgage boom of the mid 2000s, it became common to see lenders taking down payments of 10, 5 or often 0 percent. A lender is able to handle the added risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI protects the lender in the event a borrower defaults on the loan and the market price of the property is less than the balance of the loan.
PMI is pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and frequently isn't even tax deductible. Separate from a piggyback loan where the lender takes in all the damages, PMI is profitable for the lender because they collect the money, and they get the money if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How buyers can refrain from bearing the expense of PMI
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Smart home owners can get off the hook a little early. The law designates that, at the request of the homeowner, the PMI must be released when the principal amount equals just 80 percent.
Since it can take many years to get to the point where the principal is just 20% of the original loan amount, it's important to know how your home has increased in value. After all, all of the appreciation you've acquired over time counts towards abolishing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Your neighborhood may not be reflecting the national trends and/or your home may have gained equity before things cooled off, so even when nationwide trends signify plummeting home values, you should understand 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 difficult thing to know. It's an appraiser's job to know the market dynamics of their area. At Compass Appraisals, we're masters at recognizing value trends in Chico, Butte 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 cancel the PMI with little effort. 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: