Let Integrity Appraisal Services help you decide if you can eliminate your PMIIt's widely known that a 20% down payment is common when getting a mortgage. The lender's only exposure is typically just the difference between the home value and the sum due on the loan, so the 20% provides a nice buffer against the costs of foreclosure, selling the home again, and typical value fluctuations on the chance that a borrower is unable to pay.
During the recent mortgage upturn that our country recently experienced, it became customary to see lenders reducing down payments to 10, 5, 3 or often 0 percent. A lender is able to endure the increased risk of the small down payment with Private Mortgage Insurance or PMI. This supplementary plan guards the lender in the event a borrower doesn't pay on the loan and the value of the property is lower than the loan balance.
PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and many times isn't even tax deductible. Separate from a piggyback loan where the lender takes in all the damages, PMI is beneficial for the lender because they secure the money, and they get the money if the borrower defaults.
How buyers can avoid bearing the expense of PMIThe Homeowners Protection Act of 1998 requires the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law stipulates that, at the request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent. So, acute homeowners can get off the hook sooner than expected.
It can take a significant number of years to arrive at the point where the principal is only 80% of the initial loan amount, so it's necessary to know how your California home has increased in value. After all, any appreciation you've accomplished over the years counts towards dismissing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Your neighborhood might not follow national trends and/or your home might have acquired equity before the economy cooled off. So even when nationwide trends hint at a reduction in home values, you should realize that real estate is local.
A certified, California licensed real estate appraiser can help homeowners figure out if their equity has made it to the 20% point, as it's a hard thing to know. It is an appraiser's job to know the market dynamics of their area. At Integrity Appraisal Services, we're experts at determining value trends in Foothill Ranch, Orange County, and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will often remove the PMI with little anxiety. At which time, the homeowner can relish the savings from that point on.
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